Page 78 - Time Magazine, Sep. 17, 2018

THE RISK REPORT
Emerging markets are in meltdown,
SHORT
READS but for once Trump isn’t to blame
▶ Highlights By Ian Bremmer
from stories on
time.com/ideas
A CRISIS IS LOOMING existed long before Trump became Presi-
The first in developing econo- dent. Many governments of these devel-
win of the mies, or what inves- oping countries haven’t done enough in
NFL season tors know as emerg- recent years to boost productivity. Some
ing markets. An spend ever larger sums on various entitle-
“Colin Kaepernick economic crisis in ments while adjusting too slowly to
is a pariah. Colin Turkey has pushed changes in commodity prices or the avail-
Kaepernick is a inflation to new heights and the value of ability of cheap credit.
patriot,” writes TIME’s
Sean Gregory of the the lira to new lows. Argentina’s peso is Crucially, there’s also the problem
ex-quarterback whose in trouble as President Mauricio Macri of populism. Leaders in Turkey, Argen-
protest movement has reaches to the International Monetary tina, Venezuela, Hungary, Poland and
led to a lawsuit with Fund for emergency help. South Afri- South Africa have each pushed economic
the NFL—and now a ca’s rand, Mexico’s peso and Indonesia’s policies in recent years that delivered
major role in a Nike
ad campaign. Gregory rupiah are all under pressure. India and short-term political benefits while creat-
says that despite Brazil are looking volatile too. ing long-term economic weak-
not throwing a pass The risk of contagion to Vulnerable nesses. Many constrain their
in nearly two years, other emerging markets is institutions, including central
Kaepernick keeps real. In part, that’s thanks to emerging banks, from making the nec-
on winning. markets
investment vehicles that allow essary adjustments the Fed is
investors to buy debt and equi- are like now making in the U.S.
ties of multiple countries in a houses built Take Turkey. Erdogan’s
Where kids single bundle. In some cases, atop faulty various fights with Trump
learn racism investors—spooked by weak- foundations. have led to tariffs and sanc-
ness in one market—sell shares It’s the tions, but his government has
Sociologist Margaret A.
Hagerman studied in all of them to reduce risk. threat of badly mismanaged Turkey’s
30 white families for her It might be tempting to earthquakes economy. As Erdogan has
new book,White Kids. blame President Donald pressed Turkey’s central bank
She saw that children Trump for this turmoil. He’s that creates to keep interest rates low, he
learned about race fear
not just from talking declared trade wars on coun- has made the lira artificially
with their parents and tries large and small. Loom- cheap while making dollars
from the diversity of ing tariffs on another $200 billion in U.S. and euros more expensive. That, in turn,
their schools but also and Chinese goods mark the latest use makes it harder for Turkish companies
from small things such of heavy weapons in an escalating fight to pay down large debts denominated in
as when their parents
lock the door, who gets between the world’s two largest econo- foreign currencies and to borrow more
invited to cookouts and mies. He’s also battling with Europe, money from overseas. Investors see
when guardians roll Canada and even Japan, while also throw- Erdogan prioritizing political gains over
their eyes. ing punches at vulnerable Turkey as part stability.
of a bitter political battle with President Argentina offers another example.
Recep Tayyip Erdogan. These confronta- Here there’s no political battle with
The right to tions doubtless create uncertainty. Trump to worry investors. But Macri has
an education Yet the current crisis follows decisions not yet restored investor confidence in
taken by U.S. central bankers, not the his country’s long-term financial health.
University of Chicago U.S. President. Emerging markets suffer Macri has imposed enough austerity to
law professor and when rising U.S. interest rates boost the inflict pain on Argentine voters, but some
author of the new book
The Schoolhouse Gate dollar at the expense of their currencies. fear it isn’t enough to guarantee that his
Justin Driver says a The Federal Reserve will continue to raise government can make its debt payments.
firmly conservative rates in coming months, because its gov- Vulnerable emerging markets are like
Supreme Court may ernors believe this policy best serves the houses built atop faulty foundations. It’s
threaten a case that longer-term needs of the U.S. economy. the threat of earthquakes that creates fear.
ensures undocumented
children can go In addition, the longer-term weak- But until repairs are made, those who built
to school. nesses that make so many emerging these homes must shoulder blame when
markets vulnerable to higher U.S. rates frightening cracks appear. 
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