Markets like they were before 1913, report says
Global integration means there is every reason to be upbeat about the future
Global capital markets are the most integrated than at any time since the late 19th century, giving a reason to be positive about the world economic outlook.
Non-resident ownership of domestic bonds in emerging markets has increased since the financial crisis, Simon Quijano-Evans, the head of emerging-markets research at Commerzbank, said in a report this week.
Almost half of Hungary's debt is held by foreigners, doubling from 2010, while overseas ownership of Polish, Turkish, Mexican and Russian debt also has jumped.
"A tough task, but we should have plenty of room for optimism, given the ever-increasing global integration at both a human and economic level," Quijano-Evans said.
To him, it recalls the period more than a century ago when people moved freely around Europe without the need of a passport. That age ended with the first world war.
It is not the only example of inter-dependence that has formed through the financial crisis. The share of developed market exports going to developing nations rose to 30 per cent last year from 23 per cent in 2007, while industrial countries became more dependent on foreign workers.
The number of migrants was 120 million in 2010, compared with fewer than 80 million in 1990. Remittances sent home by workers from emerging markets now account for as much as 20 per cent of gross domestic product in some African nations and 10 per cent for the Philippines. Even Germany receives US$14 billion a year from its diaspora.
"Rather than cause divisions, the crisis years have highlighted how inter-dependent developed markets and emerging markets have become, substantially increasing the profile of emerging markets," said Quijano-Evans, a former official in Thailand's Ministry of Industry.
More worried is Joachim Fels, a co-chief global economist at Morgan Stanley in London. He suggested in a report to clients last month that the globalisation push of recent decades was weakening as it did a century ago.
"I wonder whether just as 1913 marked the end of the first golden age of globalisation that had begun in 1870, 2013 may mark the end of our age of globalisation, which accelerated since the 1980s and 1990s after many emerging markets opened up to international trade and capital flows," Fels said. "I'm not predicting the world wars, mass sufferings and economic depressions of the three dark decades following 1913, but I do worry about a creeping trend towards a deglobalisation of economic activity and capital flows."