Mapping a New World Order
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Mapping a New World Order

The Rest Beyond the West

Edited by Vladimir Popov and Piotr Dutkiewicz

This book identifies possible factors responsible for the recent rise of many developing countries. It examines how robust these trends actually are and speculatively predicts the implications and consequences that may result from a continuation of these trends. It also suggests possible scenarios of future development. Ultimately, it argues that the rise of ‘the Rest’ would not only imply geopolitical shifts, but could lead to proliferation of new growth models in the Global South and to profound changes in international economic relations.
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Chapter 5: Why the ‘Rest’ doesn’t need foreign finance

Luiz Carlos Bresser-Pereira


The ‘Rest’ will only be able to catch up and grow more than the West if it goes against a ‘received truth’: capital-rich countries should transfer their capitals to capital-poor countries. This is intuitively the truth, and the mantra that the West uses to occupy the markets of developing countries with their finance and their multinationals. Yet, new developmentalism tells us that developing countries will invest (and save) more if their current account is balanced, if not showing a surplus.  Starting from a balanced current account, the decision to incur in deficits or grow cum ‘foreign savings’ – actually, foreign finance – will appreciate the exchange rate in the long term and discourage investment. In consequence, we will have a high rate of substitution of foreign for domestic savings, and foreign finance will finance consumption, not investment. Yet, developing countries have difficulty realizing this, first, because the West and their economists are adamant in recommending current account deficits; second, because such policies are consistent with a high preference for immediate consumption; and third, because economists in developing countries are unable to criticize the ‘growth cum foreign savings policy’.

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