Developing Nations Emerge From Shadows as Sun Sets on the West

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After all,
the "Noughties" were plagued with financial instability
and plunging asset values, beginning with the "dotcom"
collapse and ending with "sub-prime".

Yet that’s
not the entire story. Not by a long way. You can only conclude the
last decade has been disastrous by viewing the world through a narrow
lens. Yes, the so-called "advanced economies" have performed
terribly. But, then again, they have been subject to self-imposed
policy blunders – in terms of fiscal and monetary profligacy
and the removal of key regulatory firewalls – that will make
future historians wince.

I honestly
believe the likes of Alan Greenspan and Gordon Brown will be savaged
when authoritative accounts of the past 10 years are written. Those
who dubbed the former boss of America’s Federal Reserve "the
maestro" and lauded the current UK Prime Minister as "the
Iron Chancellor" will look foolish in retrospect – even
more than they already do.

As we’ve repeatedly
whacked the self-destruct button over the last 10 years, many other
parts of the world have made enormous economic progress. Most mainstream
global investors and media outlets are only now starting to realise
this – and at a glacial pace. Conventional wisdom in the West
remains profoundly behind the curve when it comes to grasping the
extent to which the centre of economic gravity is shifting to "the
rest of the world".

Over the last
few months, Western financiers have, instead, been in triumphalist
mode, pointing to the "rebound" in share prices on Wall
Street and in the City. It’s true that during 2009, the S&P500
– America’s most watched stock index – gained 23pc while
the FTSE-100 went up 22pc. These are very strong annual gains.

This 2009 performance,
though, represents only a partial recovery from the cataclysmic
losses of 2008. Looking at the last decade as a whole places our
recent share price gains in a somewhat less triumphalist light.
Since the end of 1999, the S&P500 has actually fallen –
by no less than 24pc. This is the first decade-long drop since the
index began in 1927.

The FTSE-100
is also 21pc lower than at the start of the Noughties. On top of
that, a major reason the UK index has recovered at all this year
is that quite a few large mining companies, based elsewhere in the
world, are listed in London (for now).

It’s not just
the "Anglo-Saxon" economies which have suffered, either.
The pan-European FTSE-Eurofirst 300 has lost 34pc over the last
10 years. These numbers represent the wiping-out of, quite literally,
trillions of dollars of wealth. They are nominal figures, so the
impact of falling currencies and inflation means the actual drop
in real asset values is even more profound.

Such disastrous
losses have, for the most part, been incurred not by rich "fat-cat"
individuals, but by the pension-funds, insurance companies and other
institutional investors upon whom tens of millions of ordinary Western
households depend – or thought they could depend.

The dire performance
of Western assets markets over the last decade is unprecedented.
It severely challenges the long-standing view that holders of equity,
if they’re patient, will do well. If pondered upon, and assessed
honestly, it also unsettles the assumption, hard-wired into our
political and cultural mindset, that our part of the world will
keep getting richer.

Contrast this
sorry tale of wealth-loss with the fate of the large emerging markets
over the last decade. Off the back of a manufacturing miracle, China’s
Shanghai Composite Index of leading shares gained no less than 140pc
over the last 10 years. India’s Sensex 30, the main index on the
Bombay stock exchange, is up 249pc – the result of the country’s
IT and outsourcing skills.

Read
the rest of the article

January
6, 2010

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