The New Resilience of Emerging and Developing Countries: Systemic Interlocking, Currency Swaps and Geoeconomics
| Date | 01 May 2017 |
| DOI | http://doi.org/10.1111/1758-5899.12399 |
| Published date | 01 May 2017 |
The New Resilience of Emerging and
Developing Countries: Systemic Interlocking,
Currency Swaps and Geoeconomics
Andreas Antoniades
University of Sussex
Abstract
The vulnerability/resilience nexus that defined the interaction between advanced and developing economies in the post-WWII
era is undergoing a fundamental transformation. Yet, most of the debate in the current literature is focusing on the structural
constraints faced by the emerging and developing countries (EDCs) and the lack of changes in the formal structures of global
economic governance. This article challenges this literature and its conclusions by focusing on the new conditions of systemic
interlocking between advanced and emerging economies, and by analysing how large EDCs have built and are strengthening
their economic resilience. We find that a significant redistribution of ‘policy space’between advanced and emerging econo-
mies have taken place in the global economy. We also find that a number of seemingly technical currency swap agreements
among EDCs have set in motion changes in the very structure of global trade and finance. These developments do not signify
the end of EDCs’vulnerability towards advanced economies. They signify however that the economic and geoeconomic impli-
cations of this vulnerability have changed in ways that constrain the options available to advanced economies and pose new
challenges for the post-WWII economic order.
Policy Implications
•By extending and strengthening the existing network of bilateral and plurilateral currency swap agreements, EDCs can
reduce the vulnerabilities generated by the dominant role of the US dollar in international trade and finance.
•Small and medium developing countries must exploit the new ‘policy space’created through the competition between
Bretton Woods and Brazil, Russia, India, China and South Africa (BRICS)-led financing initiatives.
•Advanced economies should accommodate EDCs’concerns in their economic and monetary policies, in order to avoid a
new global economic meltdown.
•Global economic institutions must find ways to deal effectively with the hypervolatility generated by short-term capital
flows in order to avoid a new global economic crisis.
The emerging and developing countries (EDCs)
1
demon-
strated unexpected resilience in the face of global economic
crisis (Ammer et al., 2011; Boorman et al., 2010; Didier et al.,
2012; IMF, 2014a; Kose and Prasad, 2010; Wise et al., 2014).
There have not been generalised currency-collapses, bank
insolvencies, and debt defaults. On the contrary, it was the
first time in modern history that EDCs, especially emerging
powers, not only demonstrated strong capacity to use coun-
tercyclical economic measures (Didier et al., 2012), but also
bailed out the advanced economies (Bracke et al., 2008, pp.
13–16). Thus massive amounts of money moved, mostly
through sovereign wealth funds, from EDCs to advanced
economies, offering critical support for the recapitalisation
of a great number of leading western banks and corpora-
tions.
This article focuses on this ‘new resilience’of emerging
and developing countries. Resilience is a relative not an
absolute quality. The resilience demonstrated by the emerg-
ing and developing countries, does not mean that these
countries do not remain vulnerable to economic trends and
changes taking place in the advanced economies. It indi-
cates, however, that the degree of this vulnerability and the
way it functions may have changed. In this context, the arti-
cle examines the factors that underlie this new resilience,
and its implications for the emerging powers of the global
South.
Resilience is conceptualised as the ability of the EDCs to
deal with external economic shocks and persistent adverse
international economic conditions (e.g. a prolonged period
of low growth or high interest rates in advanced econo-
mies).
2
The EDCs’resilience may increase or decrease as a
result of domestic economic conditions and policies, the fre-
quency, duration and intensity of the adverse external
developments, as well as broader changes in the global dis-
tribution of power and wealth. The ability of the EDCs to
endure external volatility, crises and shocks, is also deter-
mined by the wider structure of the global political econ-
omy, and the way in which (different) EDCs are integrated
©2016 University of Durham and John Wiley & Sons, Ltd. Global Policy (2017) 8:2 doi: 10.1111/1758-5899.12399
Global Policy Volume 8 . Issue 2 . May 2017
170
Research Article
To continue reading
Request your trial