The single best idea for preventing another financial crisis and ensuring job growth in the middle class.
See the proposal here: http://www.defazio.house.gov/index.php?option=content&task=view&id=532
Justifications can be found here (the PDF file is especially useful; other links indicate broad-based support).
Showing posts with label Economic Crisis. Show all posts
Showing posts with label Economic Crisis. Show all posts
Friday, December 4, 2009
Friday, March 20, 2009
Spitzer as Columnist
Just a quick one here - Eliot Spitzer is apparently an excellent columnist, despite his personal problems. For some excellent commentary on the current economic crisis, problems facing governors, AIG, and the stimulus package, see the link below.
http://www.slate.com/?id=3944&qp=49481
http://www.slate.com/?id=3944&qp=49481
Friday, November 28, 2008
Good Op-eds on Economic Policy & My Take
There have been quite a few excellent op-eds on economic policy over the past few days, due in large part to Obama announcing his economic team.
Paul Krugman on financial crises and the need for regulation: Lest We Forget
David Brooks on forcing stimulus to have a long-term strategy: Stimulus for Skeptics
Dean Baker on the selection of the current economic team: Geithner at Treasury: Can He Learn?
For a bit more innuendo on why this economic team might be suspect, see this article in the Washington Post: Familiar Trio at Heart of Citi Bailout
My Take:
On the one hand, I am somewhat heartened to see that Obama seems to have something of a long-term strategy attached to stimulus - green technology, infrastructure, and patching the holes in the safety net. I will note one caveat there - he has also mentioned "aid to local and state governments" but has not mentioned what the aid would be used for. Might I suggest local public transit initiatives as an excellent option? Connected with a real rail infrastrucure (at least in California and East of the Missisippi), a good network of local public transit would do a lot to solving energy problems and building integrated markets. There are still a number of major cities that lack a real metro system, for instance (Philidelphia is but one example).
On the other hand, I am worried that Obama has been so cautious in his selection of his economic policy team. I expected to see a few old hands in top policy positions - particularly Geithner. But I was also hoping to see Obama do a little reaching out to the left - the source of his core support. In fact, his economic team is arguable more conservative than Bill Clinton's - after all, Clinton had Joeseph Stiglitz has his chairman of the Council of Economic Advisors. Christina Roemer is a solid choice, giver her expertise on the Depression, but having all of the other top positions held by centrist figures (Summers, Voelcker, Geithner, and Goolsbee) makes one wonder exactly how much debate there will be on economic policy.
Furthermore, all of these gentlemen (excepting Goolsbee), have had a hand in serious policy blunders. Summers is well-known for his part in the deregulation leading to this crisis - he was Treasury Secretary when the bank holding provisions of Glass-Steagall were repealed, and when the SEC avoided regulating credit default swaps (at the behest of Hank Paulson when he was at Goldman Sachs, among others). Voelcker spearheaded the end of stagflation, but he did so by strangling the US economy and raising interest rates to ridiculous levels. In doing so, he also sparked the debt crisis in the developing world, known as the "Lost Decade" in Latin America.
Geithner, on the other hand, was a member of the team that ensured IMF austerity conditions would be attached to loans in the 1997-8 Asian crisis. In essence, he forced countries facing an outflow of investment capital to spend less on their economies and to raise their interest rates... and these were countries that had balanced their budgets for years (unlike the US). These policies are known as "pro-cyclical" in economics jargon, and they have the effect of exacerbating a pre-existing crisis. In fact, the country that recovered most quickly from the crisis was Malaysia, who ignored IMF advice and imposed controls on capital flight, cut interest rates, and increased spending. This is exactly the opposite of what the US is doing now, and the exact opposite of what economists recommend should be done in a crisis.
Whether these gentlemen have learned from the past twenty years of supposed "consensus" that led to this fiasco remains to be seen. Until I see proof that they have, however, I worry that any response to the current crisis will be luke-warm - too small and too short-term. That was the mistake FDR made in the Depression, and if we learn from history, we should not make the same mistake again.
Paul Krugman on financial crises and the need for regulation: Lest We Forget
David Brooks on forcing stimulus to have a long-term strategy: Stimulus for Skeptics
Dean Baker on the selection of the current economic team: Geithner at Treasury: Can He Learn?
For a bit more innuendo on why this economic team might be suspect, see this article in the Washington Post: Familiar Trio at Heart of Citi Bailout
My Take:
On the one hand, I am somewhat heartened to see that Obama seems to have something of a long-term strategy attached to stimulus - green technology, infrastructure, and patching the holes in the safety net. I will note one caveat there - he has also mentioned "aid to local and state governments" but has not mentioned what the aid would be used for. Might I suggest local public transit initiatives as an excellent option? Connected with a real rail infrastrucure (at least in California and East of the Missisippi), a good network of local public transit would do a lot to solving energy problems and building integrated markets. There are still a number of major cities that lack a real metro system, for instance (Philidelphia is but one example).
On the other hand, I am worried that Obama has been so cautious in his selection of his economic policy team. I expected to see a few old hands in top policy positions - particularly Geithner. But I was also hoping to see Obama do a little reaching out to the left - the source of his core support. In fact, his economic team is arguable more conservative than Bill Clinton's - after all, Clinton had Joeseph Stiglitz has his chairman of the Council of Economic Advisors. Christina Roemer is a solid choice, giver her expertise on the Depression, but having all of the other top positions held by centrist figures (Summers, Voelcker, Geithner, and Goolsbee) makes one wonder exactly how much debate there will be on economic policy.
Furthermore, all of these gentlemen (excepting Goolsbee), have had a hand in serious policy blunders. Summers is well-known for his part in the deregulation leading to this crisis - he was Treasury Secretary when the bank holding provisions of Glass-Steagall were repealed, and when the SEC avoided regulating credit default swaps (at the behest of Hank Paulson when he was at Goldman Sachs, among others). Voelcker spearheaded the end of stagflation, but he did so by strangling the US economy and raising interest rates to ridiculous levels. In doing so, he also sparked the debt crisis in the developing world, known as the "Lost Decade" in Latin America.
Geithner, on the other hand, was a member of the team that ensured IMF austerity conditions would be attached to loans in the 1997-8 Asian crisis. In essence, he forced countries facing an outflow of investment capital to spend less on their economies and to raise their interest rates... and these were countries that had balanced their budgets for years (unlike the US). These policies are known as "pro-cyclical" in economics jargon, and they have the effect of exacerbating a pre-existing crisis. In fact, the country that recovered most quickly from the crisis was Malaysia, who ignored IMF advice and imposed controls on capital flight, cut interest rates, and increased spending. This is exactly the opposite of what the US is doing now, and the exact opposite of what economists recommend should be done in a crisis.
Whether these gentlemen have learned from the past twenty years of supposed "consensus" that led to this fiasco remains to be seen. Until I see proof that they have, however, I worry that any response to the current crisis will be luke-warm - too small and too short-term. That was the mistake FDR made in the Depression, and if we learn from history, we should not make the same mistake again.
Wednesday, November 12, 2008
Hank Paulson's Bailout Shift...
Apparently, the US Department of Treasury may be coming gradually to its senses. Earlier today, Hank Paulson announced that the focus of the bailout plan would shift, focusing more on direct capital infusions from the government (in association with private investors) rather than purchasing of toxic assets. Rather than bailing out the bankers, as we have all feared, this welcome move is intended to bolster liquidity in credit markets and insure reliable access to consumer credit, while granting the government direct authority to ensure that banks do their number one job: keep lending. For more on this change, see this article in the Financial Times and this one in the New York Times.
On the other hand, Paulson has maintained that the focus on the bailout should be targeted at the financial sector, rather than giving aid to Detroit auto manufacturers. On the face of things, this might make sense, until you consider the fact that car manufacturers are major financial institutions in their own right. After all, every company-owned dealership extends credit to consumers to facilitate buying cars, and all those loans are kept on the books. It is more than a bit naive to assume that the auto industry, which employs a lot of workers in typically hard-hit "Middle America" (Michigan, Indiana, Ohio especially), can weather a credit crisis when the goods it sells are so dependent on access to consumer credit. Unfortunately, in typically narrow-minded fashion, still-President-for-now Bush has made his approval of any economic stimulus (including for automakers) contingent on Congress dropping opposition to the Colombia Free Trade Deal.
None of this is to argue that cars are a good thing, or that we should continue producing cars. However, even those long-sighted auto manufacturers like Toyota and Honda, with their hybrid marketing and fuel-efficient lines, have taken a sales hit over the past year or so. In the medium-term we need to get off of foreign oil, but real public transport (both local and interstate) takes time to build, and until then we need to keep our auto workers employed. The collapse of any of the Big Three would have a devastating impact on what manufacturing economy this country has left. The private car isn't going away anytime soon, and these companies have been hard-hit by an external shock. Like it or not, they need government assistance to retool (and even to prevent job cuts), and frankly enough of the burden to justify using government funds lies on the American taxpayers' historic aversion to rail and public transit in favor of cars and jets.
As I indicated in my letter to President-Elect Obama, the key here is to capture synergies. We need to provide funds to automakers, but those funds need to be contingent upon a significant retooling of their automobile lines - away from SUVs and towards fuel-efficient city vehicles, hybrids, plug-in hybrids, electric cars (like those being developed by Tesla Motors), and hydrogen fuel cells (Note: I do not include ethanol because it has devastating impact on food prices, particularly in the developing world). Then, when the President-Elect takes office, we can hopefully turn our attention to public transit infrastructure (light rail and high-speed rail, especially), green energy generation, and the supporting infrastructure for alternative fuels (especially hydrogen and public plugs for plug-ins/electrics).
On the other hand, Paulson has maintained that the focus on the bailout should be targeted at the financial sector, rather than giving aid to Detroit auto manufacturers. On the face of things, this might make sense, until you consider the fact that car manufacturers are major financial institutions in their own right. After all, every company-owned dealership extends credit to consumers to facilitate buying cars, and all those loans are kept on the books. It is more than a bit naive to assume that the auto industry, which employs a lot of workers in typically hard-hit "Middle America" (Michigan, Indiana, Ohio especially), can weather a credit crisis when the goods it sells are so dependent on access to consumer credit. Unfortunately, in typically narrow-minded fashion, still-President-for-now Bush has made his approval of any economic stimulus (including for automakers) contingent on Congress dropping opposition to the Colombia Free Trade Deal.
None of this is to argue that cars are a good thing, or that we should continue producing cars. However, even those long-sighted auto manufacturers like Toyota and Honda, with their hybrid marketing and fuel-efficient lines, have taken a sales hit over the past year or so. In the medium-term we need to get off of foreign oil, but real public transport (both local and interstate) takes time to build, and until then we need to keep our auto workers employed. The collapse of any of the Big Three would have a devastating impact on what manufacturing economy this country has left. The private car isn't going away anytime soon, and these companies have been hard-hit by an external shock. Like it or not, they need government assistance to retool (and even to prevent job cuts), and frankly enough of the burden to justify using government funds lies on the American taxpayers' historic aversion to rail and public transit in favor of cars and jets.
As I indicated in my letter to President-Elect Obama, the key here is to capture synergies. We need to provide funds to automakers, but those funds need to be contingent upon a significant retooling of their automobile lines - away from SUVs and towards fuel-efficient city vehicles, hybrids, plug-in hybrids, electric cars (like those being developed by Tesla Motors), and hydrogen fuel cells (Note: I do not include ethanol because it has devastating impact on food prices, particularly in the developing world). Then, when the President-Elect takes office, we can hopefully turn our attention to public transit infrastructure (light rail and high-speed rail, especially), green energy generation, and the supporting infrastructure for alternative fuels (especially hydrogen and public plugs for plug-ins/electrics).
Monday, November 10, 2008
Keynes, revisited...
In case people remain worried about the cost of economic stimulus + the bailout, and don't trust my economics, may I suggest an editorial by a Nobel Prize-winning economist? Paul Krugman's take on a stimulus package and the New Deal can be found here.
Wednesday, July 23, 2008
McCain's Ignorance and Incompetance, revisited...
About a week ago I posted about how, though I'm relatively happy with the two candidates this time around, I'm still somewhat frightened by McCain - his inability to understand basic economics, complete lack of familiarity with modern technology, and (perhaps worst) incompetence in choosing worthwhile advisers. This op-ed by Frank Rich at the New York Times makes much the same point, and is extremely thorough. Republicans, read at your own risk!
http://www.nytimes.com/2008/07/20/opinion/20rich.html
http://www.nytimes.com/2008/07/20/opinion/20rich.html
Monday, April 28, 2008
Crisis at the IMF?
In the midst of the current food crisis in much of the developing world, the international financial institutions (i.e. the International Monetary Fund (IMF) and the World Bank) are trying to cast themselves as saviors of the developing world. Would that this were true - but the IFIs have never been the saving angels they see themselves to be. At best, the IMF exists to provide emergency budget and balance-of-payments support loans to beleaguered governments, and does so with minimal interference. At worst, the IMF attaches strict conditions to these loans, requiring developing countries to slash public expenditures targeted at poverty alleviation, liberalize volatile portfolio flows to countries without a well-developed banking sector, and helps banks negotiate full repayment on loans made to previous corrupt dictators (like Ferdinand Marcos in the Philippines, or Mobutu Sese Seku in Zaire (now the DRC)).
Fortunately, for all the talk from the IFIs following their semi-annual meetings earlier this month, the IMF is faced with a financial crisis of its own, and its influence is waning. When I was researching the Bank of the South last semester, I also sidetracked onto the IMF to see how their finances looked - and what is obvious is that nearly every country in South America has repaid the fund (with Argentina forcing creditors to accept only 30% of what they were owed, arguing against the fund's bad lending practices and conditionalities). In fact, countries across the globe are repaying the fund at an accelerated pace - even Turkey, which now holds around 40% of the IMF's portfolio, prompting The Economist to call it the "Turkish Monetary Fund." Regardless of the rhetoric, the decline of the international credit hierarchy and the clout of the IMF may end up being a welcome thing, so long as countries with viable and responsible governments retain access to sufficient credit to keep themselves afloat. None of this is to suggest that we are seeing the end of the IFIs, but their influence is, and will probably continue to be, significantly reduced.
A recent CEPR piece presents similar research and analysis in more detail, I highly recommend it.
Fortunately, for all the talk from the IFIs following their semi-annual meetings earlier this month, the IMF is faced with a financial crisis of its own, and its influence is waning. When I was researching the Bank of the South last semester, I also sidetracked onto the IMF to see how their finances looked - and what is obvious is that nearly every country in South America has repaid the fund (with Argentina forcing creditors to accept only 30% of what they were owed, arguing against the fund's bad lending practices and conditionalities). In fact, countries across the globe are repaying the fund at an accelerated pace - even Turkey, which now holds around 40% of the IMF's portfolio, prompting The Economist to call it the "Turkish Monetary Fund." Regardless of the rhetoric, the decline of the international credit hierarchy and the clout of the IMF may end up being a welcome thing, so long as countries with viable and responsible governments retain access to sufficient credit to keep themselves afloat. None of this is to suggest that we are seeing the end of the IFIs, but their influence is, and will probably continue to be, significantly reduced.
A recent CEPR piece presents similar research and analysis in more detail, I highly recommend it.
Friday, April 11, 2008
Iraq: Surge, Costs, and Likely Results
Below are two articles from Foreign Policy on the current and evolving situation in Iraq:
First is a brief interview with Nobel Prize-winning Columbia economist Joseph Stiglitz who tends to be worth listening to, particularly for the well-balanced liberal perspective. According to his modeling, the real costs of the war could be in excess of $3 trillion. He also gives brief comments on Bear Stearns and the limits of monetary policy in stabilizing the US economy.
Second is an analysis of the likely effects of the vaunted surge - or lack thereof. The general argument - that a "positive" scenario for Iraq's medium-term future looks like Nigeria, and a "negative" scenario looks like Somalia or Sudan (admittedly, with more oil) - is a well-taken recognition of fundamental economic, political, and social realities as they relate to Iraq's level of development. Indeed, General Petraeus deserves some credit for holding the situation together as well as he has, though no military tactics can really change these realities. I should say that the one thing that may have helped would have been the proper management of development projects (e.g. the electricity grids in Baghdad, etc) - a task that the administration has seriously bungled. Of course, even that may only have had minimal impact, who knows?
First is a brief interview with Nobel Prize-winning Columbia economist Joseph Stiglitz who tends to be worth listening to, particularly for the well-balanced liberal perspective. According to his modeling, the real costs of the war could be in excess of $3 trillion. He also gives brief comments on Bear Stearns and the limits of monetary policy in stabilizing the US economy.
Second is an analysis of the likely effects of the vaunted surge - or lack thereof. The general argument - that a "positive" scenario for Iraq's medium-term future looks like Nigeria, and a "negative" scenario looks like Somalia or Sudan (admittedly, with more oil) - is a well-taken recognition of fundamental economic, political, and social realities as they relate to Iraq's level of development. Indeed, General Petraeus deserves some credit for holding the situation together as well as he has, though no military tactics can really change these realities. I should say that the one thing that may have helped would have been the proper management of development projects (e.g. the electricity grids in Baghdad, etc) - a task that the administration has seriously bungled. Of course, even that may only have had minimal impact, who knows?
Wednesday, April 2, 2008
Our Troubled Economy
The other day, one of my professors (an economist w/ the Dept. of the Interior) mentioned the media coverage around our current economic situation and suggested that we may be limited in what we can do about it right now. He also mentioned that most media analysis is incomplete, right now. Below is an attempt to piece together the causes of our current troubles based on his take and what I know from my political economy research (focusing on India/China right now, so somewhat applicable).
There seem to be four identifiable causes of our current economic woes. I have outlined these causes below along with problems regarding potential US actions to help the economy adjust.
(1) Spiking commodity prices - particularly in food (wheat and corn) and energy (oil prices), but also in other industrial commodities and heavy industry (steel prices have been gradually rising on balance for a few years now, for example, and other mined commodities like copper and zinc have shown similar price increases). Most of this is due to rising demand from China and India, with biodiesel production having some impact on the food markets. This has both slowed growth and driven increased inflation.
The question then is what we can do about it - which is a complicated issue in itself, and I'm not going to try to answer it here, since most economists seem confused.
There seem to be four identifiable causes of our current economic woes. I have outlined these causes below along with problems regarding potential US actions to help the economy adjust.
(1) Spiking commodity prices - particularly in food (wheat and corn) and energy (oil prices), but also in other industrial commodities and heavy industry (steel prices have been gradually rising on balance for a few years now, for example, and other mined commodities like copper and zinc have shown similar price increases). Most of this is due to rising demand from China and India, with biodiesel production having some impact on the food markets. This has both slowed growth and driven increased inflation.
Problem: The devaluing dollar (see #2, below) means that some of these prices are only rising for the US, or rising by a substantially larger margin in the US than elsewhere. The reason is that many commodities (including oil) are dollar-denominated, so the falling dollar keeps prices lower in Europe, Canada, and Japan than they are here. These energy costs also spill over into other sectors (e.g. food costs from transportation) more in the US than abroad. Similarly, the US is still a net food exporter (though less than in the 1990s), so other countries also reap cheaper US food imports in their country - driving up demand for US agricultural goods and continuing to force prices up at home.(2) Devaluing Dollar - the slumping dollar relative to the Euro, Yen, Pound Sterling, and Loonie (a good historic lookup tool can be found here) has been a long time in the making, as a result of sustained government efforts in the 80s to maintain a strong dollar coupled with a significant and mounting current account deficit sustained over many years (with a number of causes).
Problem: China, the country to which the US trade deficit is the largest, still habitually undervalues its currency relative to the dollar, as we are a major Chinese trade partner and China relies on export earnings to finance domestic industrial transformation. For many countries it would be difficult to keep this up as the dollar devalues, but the Chinese hold 22% of the world's total foreign exchange reserves and can continue to maintain this peg for a significant period of time. This may prolong the devaluation of the dollar relative to the other major currencies.(3) Post-war Transition - much of the growth in the past few years has been stimulated by significant wartime deficit spending by the government. We are now entering a period of scaling back as a result of somewhat lower conflict in Iraq, and potentially scaling back the troops. The shift from wartime to peacetime triggers frictional unemployment because labor cannot always immediately transfer between activities (see the Bureau of Labor Statistics "Recent Months" output, I focused on 2003-8 and used the chart output, but data goes back to 1996). Notice that the unemployment rate reached a low right as the Democrats consolidated power in Congress and started taking action against the President's war spending (Mid-2006 to Early 2007).
Problem: The war cannot be sustained indefinitely, and wartime spending can trigger inflation anyway. However, there is a limit to what Congress can do to accelerate the process given the lack of cooperation between the White House and the Hill. We're unlikely to see expansions to unemployment insurance or increases in domestic social spending or investment initiatives until the next administration, whoever that ends up being, because of the animosity between Congress and the Executive. Plus, in the current deadlock, the government is strapped for the cash to send a significant stimulus package.(4) Housing Bubble Burst - This has been in the news a lot lately - and is a combination of outdated regulatory frameworks, trends towards market speculation - especially in real estate (remember the Asian Crisis in 97-98 as an example - both the Thai and Korean real estate bubbles burst), and investors that were bamboozled by supposed "risk-diversification" instruments that were over-hyped at best (risk is part of investment, it doesn't go away just because a mortgage has been fragmented and repackaged with other mortgages). Predatory lending practices probably also played a role (though this is likely exaggerated and sensationalized in the media - it makes a good story). Similarly, the US tendency towards not saving and acquiring credit card debt makes consumers and homeowners more vulnerable, and expands the problems in credit/finance markets.
Problem: The Fed is starting to run out of options. Somewhere between a base interest rate of 1-2%, we hit a "liquidity trap" where fed funds reductions don't do much to stimulate the markets. The current Federal Funds rate is at 2.25%, which means the Fed has about 75 basis points of wiggle room. Beyond that, it can help negotiate bail-outs of major firms to rescue the system from collapse and buy up some of the subprime securities to reduce the risk of many investments in the financial system (it has started to do both). Even these last-ditch responses from an activist Fed will, in all likelihood, only have mild-moderate effect. The Japanese central bank tried similar moves during the 1990s but eventually was forced to wait out the recession as it was unable to rescue all the institutions needing bailouts (here there is a moral hazard question regarding how much the Fed should do to rescue sinking institutions, with some arguing the Japanese tried too many generous bail-outs). Given the historical perspective on similar crises, it's likely that the Fed's actions will only moderate the crisis somewhat.So - I've tried to lay out the causes and challenges of the current crisis. It might be worth noting that (1) and (3) bear some similarity to Carter-era stagflation. (4) is similar to financial crises in the 1990s in Japan and then SE Asia (which spread to Russia, Mexico, Argentina, etc.). (2) is a more unique element, at least for the US, as far as I know - partly because of the hoarding of exchange reserves that happened in East Asia following the 1997-8 crisis.
The question then is what we can do about it - which is a complicated issue in itself, and I'm not going to try to answer it here, since most economists seem confused.
Friday, March 14, 2008
Sovereign Wealth Funds and Democracy
A pleasantly moderate article on the Sovereign Wealth Fund issue can be found here: http://www.opendemocracy.net/article/globalisation/global_politics/stolen_wealth_funds
It is worth noting that this issue is normally polarized along one of two lines: (a) non-transparent foreign wealth funds are evil and out to ruin the US economy or (b) wealth funds finally mean the south is less dependent on northern financial markets, which is a wonderful thing. I would usually tend to fall a little more into the "(b)" camp, but the wealth funds are typically found in OPEC countries and Singapore - not necessarily the most altruistic of governments towards other southern countries. Still, the variety of political agendas of those new significant shareholders could make development finance interesting in the coming years.
It is worth noting that this issue is normally polarized along one of two lines: (a) non-transparent foreign wealth funds are evil and out to ruin the US economy or (b) wealth funds finally mean the south is less dependent on northern financial markets, which is a wonderful thing. I would usually tend to fall a little more into the "(b)" camp, but the wealth funds are typically found in OPEC countries and Singapore - not necessarily the most altruistic of governments towards other southern countries. Still, the variety of political agendas of those new significant shareholders could make development finance interesting in the coming years.
Emerging Markets, the Housing Crisis, and Decoupling
The Economist is always a fun source for news, and this article is no exception: http://www.economist.com/displayStory.cfm?story_id=10808782&fsrc=RSS
Just a quick note on a potential problem with this analysis: The sampling and examples given are very China and India intensive. While it is true that China and India are home to about 2.5 billion people, and represent substantial emerging markets, the case for "decoupling" may be different in the rest of the developing world (some 120 countries in East Europe, Sub-Saharan Africa, South America, and other parts of Asia). The discussion of emerging economies it typically limited to around 15-20 countries - including China, India, S. Korea, Singapore, Hong Kong, Malaysia, Taiwan, Indonesia, Thailand, Brazil, Chile, and Turkey - but excluding most of Africa, South America, and East Europe.
What that means is that, on the face of things, those countries in the emerging markets category may be gradually decoupling from the global north, but other countries are still dependent on northern consumer markets for their exports and financial markets to fund their governments. Some of these countries may be indirectly insulated by the decoupling of emerging markets to a certain extent (Chinese aid to Africa is on the rise, and much of South America is pushing for increased regional integration to limit dependence on the US market), but many countries in the global south are still primarily dependent on the US and the EU for their continued growth (Especially East Europe, Central America, Mexico, and most of Africa). Furthermore, much of the "decoupling" tends to occur in resource-extraction industries, rather than agriculture. Consider, for example, that 70% of Indians are still employed in small-scale agriculture and informal rural activities.
Just a quick note on a potential problem with this analysis: The sampling and examples given are very China and India intensive. While it is true that China and India are home to about 2.5 billion people, and represent substantial emerging markets, the case for "decoupling" may be different in the rest of the developing world (some 120 countries in East Europe, Sub-Saharan Africa, South America, and other parts of Asia). The discussion of emerging economies it typically limited to around 15-20 countries - including China, India, S. Korea, Singapore, Hong Kong, Malaysia, Taiwan, Indonesia, Thailand, Brazil, Chile, and Turkey - but excluding most of Africa, South America, and East Europe.
What that means is that, on the face of things, those countries in the emerging markets category may be gradually decoupling from the global north, but other countries are still dependent on northern consumer markets for their exports and financial markets to fund their governments. Some of these countries may be indirectly insulated by the decoupling of emerging markets to a certain extent (Chinese aid to Africa is on the rise, and much of South America is pushing for increased regional integration to limit dependence on the US market), but many countries in the global south are still primarily dependent on the US and the EU for their continued growth (Especially East Europe, Central America, Mexico, and most of Africa). Furthermore, much of the "decoupling" tends to occur in resource-extraction industries, rather than agriculture. Consider, for example, that 70% of Indians are still employed in small-scale agriculture and informal rural activities.
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