Lisa Tilley
What does it mean for a postcolonial country to be understood as an ‘emerging market’? The term itself has become a marker of inclusion within the world of mobile capital, but also a racialised marker of exclusion from the world of developed markets. Further, and despite the deceptive dynamism of the term, it indicates a relatively fixed subject positioning in relation to (mainly) Western capital within a racially hierarchised system. Overall, the emerging market discourse is understood here as a mode of constructing investibility which was explicitly authored to replace the once emancipatory idea of the Third World [1].
Global structural formation and the Third Worldist challenge
The structural remaking of the global economy during the long centuries of European colonialism was effected largely through the wholesale destruction of local industries in colonised areas and the construction of new extractive industries supplying European and other global markets. These industries were usually based on racialised labour regimes through which Europeans ordered ethnic groups into complex hierarchies. White European owners of capital invested in, and accumulated from, racialised colonial spaces and populations, themselves internally divided and organised hierarchically according to racial categories. In turn, processes of racialisation were (and still are) deeply tied to the organisation of accumulation and expropriation [2].
The most extensive and promising, albeit flawed, attempt to break down and reconfigure these extractive, racialised structures of the global economy was exerted in the form of ‘Third Worldism,’ a collective endeavour among (former) colonies which accompanied formal decolonisation [3]. Globally however, Third Worldist projects and most attempts at delinking from imbalanced structural relations with the old imperial core, as well as state-led attempts to reverse colonially produced poverty by building internal social programmes, were subject to dismantling through a variety of external interventions (from loan conditionalities to CIA-backed coups) by the US, European countries, and the global institutions they dominate.
From self-authored Third World to externally ascribed ‘emerging market’
While multinational corporations with substantial capital and capacity were edging their way back into a number of newly independent countries during the 1970s, investment managers were still complaining about the perception of formerly colonised countries as otherwise overly risky for private investors. The question was, how to reconstruct the investibility of this ‘Third World’ for private capital and overcome the association of that term with risk, instability, and poverty? From the perspective of investment managers, a new organising grammar was needed to encourage private investment flows into formerly colonised countries.
Investment Manager Antoine Van Agtmael is the man often credited in the investment press with the invention of the term ‘emerging market’ in the early 1980s (see for example Financial Times 2006; Economy Watch 2010). This was neither an arbitrary labelling nor a considered classification based on empirical observation, and it was certainly not the result of a sudden change in the self-identification of the countries now understood to be ‘emerging markets’. From the beginning, emerging markets were labelled as such in order to discursively construct them as viable sites for private foreign investment among those who viewed the Global South with disdain. As Van Agtmael recalls, the mantra among trust managers in the 1970s was “There are no markets outside the United States” [4].
Against what he perceived to be the collective mood of the times in the investment world, Van Agtmael presents himself as a pioneer of portfolio innovations in countries seen at the time as unsafe for private investment. In his own words, Van Agtmael claimed he had long been “fascinated with the fate and fortunes of what was then known disparagingly as “The Third World”” (ibid: 1). As such he and some of his fellow financiers, whom he describes as “courageous” set about redescribing the Third World, or at least a selected portion of it, as “emerging markets” which could be grouped together for ‘basket’ investments in order to disperse the risk involved. According to Van Agtmael’s account, this is how parts of the former Third World, as well as parts of the former Soviet Union, became included as component parts of funds with risk spread over broad portfolios.
In reality, the broader picture of global credit market transformation following the debt crisis of the 1980s was much more complex than Van Agtmael’s account suggests. At this time, bank loans were increasingly perceived to pose a systemic risk, so the disintermediation of financial systems through the development of domestic bond markets was pursued as a market-based means of reducing this risk. At the same time, a shift in private sector lending towards the development of portfolio lending also reduced the prevalence of bank loans. However, these increased portfolio investment flows would go on to create new systemic risks and short-term speculative capital would eventually play a prominent role in the financial crisis in East Asia in the late 1990s [5].
Further, the act of relabelling parts of the world under a new sign invented by Western investors was clearly Orientalist in the sense that it sought epistemic control over the depiction of the Third World in order to justify a new form of economic intervention within it. The ‘emerging market’ should therefore be seen as part of the broader material and discursive dismantling of the Third World and as a means of repositioning postcolonial countries firmly back in relations of extractive dependency with the financial centres of the old imperial core.
New global market hierarchies
Aside from providing a common marker for mainly postcolonial and post-Soviet countries like Indonesia, Malaysia, Chile, and Poland, which are otherwise diverse in terms of political and economic policies and institutions, the emerging market term also serves as the organising discourse for global investment databases. Morgan Stanley Capital International (MSCI) equity index, for instance, classifies 24 countries as ‘emerging markets’ and a further 29 as ‘frontier emerging markets’. For Morgan Stanley, these classifications – the latter marked with the ‘frontier’ echo of settler colonial advance – are based on market access conditions for foreign investors. In contrast, however, the International Monetary Fund (IMF) considers 152 countries to be ‘emerging markets’, using the criteria of export diversification, per capita income, and global financial integration in the decision to ascribe that label (see for example Financial Times 2015).
The term emerging market can further be used to refer both to countries themselves and to the currency, equity, and bond markets within those countries. One correlate of this ambiguity is that the emerging market term may be ascribed to indicate the level of advancement in financial market development, but it may be more often read as an indication of overall economic performance. Further, an ‘emerging market economy’ is clearly discursively positioned as subordinate to a ‘developed market economy’ within a constructed global hierarchy. And, when ‘emerging markets’ come to be spoken of in terms of ‘submerging markets’, this change in status is not usually indicative of any sudden unwinding of financial market capacity, but related instead to perceived poor economic performance and capital outflows (see, for example, Financial Times 2013).
If it can be said that ‘emerging market’ and ‘developed market’ classifications are more often read as markers of a country’s position on a global hierarchy of market economies, in some cases these labels do not even correspond with the real positioning of a country’s economic performance and stability, as the financial press itself concedes:
Chile has a bigger economy, a bigger population, less debt and lower unemployment than Portugal but is classed as emerging, whereas the European nation remains part of the developed world. Similarly, on a per-capita income basis, Qatar, Saudi Arabia and South Korea are wealthier than several developed countries, but are still consigned to the emerging camp. (Financial Times 2015)
In these cases, the emerging market term functions as a racial signifier, maintaining the hierarchical distinction between the ‘superior’ developed West and its ‘inferior’ Others, even when this is grounded in no differential economic correlate. In this sense the emerging market label has dual and seemingly diametric functions – first as a marker of optimism, of inclusion within the world of mobile capital, of investibility; and second as a marker of exclusion from the world of developed markets. This corresponds with elements of the condition of colonialism as a simultaneous inclusion within, and exclusion from, a centre of power in a broader hierarchised system.
References
[1] Tilley, L. (2016). The Condition of Market Emergence in Indonesia: Coloniality as Exclusion and Translation (Doctoral dissertation, University of Warwick).
[2] Li, T. M. (2017). The Price of Un/Freedom: Indonesia’s Colonial and Contemporary Plantation Labor Regimes. Comparative Studies in Society and History, 59(2), 245-276.
[3] Hernawan, B. (2016). Papua and Bandung: A Contest Between Decolonial and Postcolonial Questions. In, Quỳnh Pham and Robbie Shilliam (Eds.) Meanings of Bandung: Postcolonial Orders and Decolonial Visions. Rowman & Littlefield International
[4] Van Agtmael, A. (2007). The Emerging Markets Century: How a New Breed of World-Class Companies is Overtaking the World. New York: Simon and Schuster.
[5] Rethel, L. (2012). Each Time is Different! The Shifting Boundaries of Emerging Market Debt. Global Society, 26(1), 123—143.
Lisa Tilley is Lecturer in Politics at Birkbeck, University of London and is currently working on the Leverhulme project ‘Race, Intimacy, and Extraction on an Internal Frontier’. She recently co-edited a special issue on race and political economy entitled ‘Raced Markets’ for the journal New Political Economy, and is otherwise part of the collective organisation of the Colonial, Postcolonial, Decolonial Working Group of BISA and the Global Social Theory online resource.