Turnaround

Thirty years ago, China seemed hopelessly mired in poverty, Mexico triggered the Third World Debt Crisis, and Brazil boasted one of the world’s highest rates of inflation. Since then, these and other developing countries have turned themselves around, while First World nations, battered by economic and fiscal crises, depend more than ever on sustained growth in emerging markets. The future prosperity of the global economy hinges on our combined ability to learn the lessons that emerge from prior struggles with economic reform.

In TURNAROUND: Third World Lessons for First World Growth (Basic Books; March 12, 2013), economist Peter Blair Henry argues that the secret to emerging countries’ success (and ours) is discipline—sustained commitment to a pragmatic growth strategy. With the global economy teetering on the brink, the stakes are higher than ever. And precisely because the stakes are so high, for poor and rich nations alike, there is a dire need for less polarization and more focus on facts to answer the fundamental question: which policy reforms, implemented under what circumstances, actually increase economic efficiency and help countries make the most of their scarce resources?

Pushing past the tired, ideologically driven debates, Henry uses objective stock market analysis to assess policy outcomes. Stock markets reflect collective wisdom about the future impact of economic reforms, providing forecasts that are an important complement to traditional measures of policy effectiveness. Through a variety of examples, ranging from the drastic income disparity between Barbados and his native Jamaica to the “catch up” economics of China and the taming of inflation in Latin America, Henry shows that in much of the emerging world the policy pendulum now swings in the direction of prudence and self-control. With similar discipline and a dash of humility, he concludes, the First World may yet recover and create long-term prosperity for all its citizens.