Tuesday, 7 October 2008
What happens to frontier economies in a depression?
It has become fashionable to cite the Great Depression as a feasible scenario following the credit crisis. The question we get asked is how will this impact frontier markets. The answer is that we can look back to what happened to the Frontier markets of the 1930's. Academic evidence shows that industrialization actually accelerated in many less-developed countries during the Great Depression and subsequent decades. This industrialization resulted from the less-developed countries being delinked from the international economy. This delinking caused countries in parts of Latin America, Africa, and Asia to shift production away from exports such as agricultural products and minerals and toward production of manufactured goods.