The New Resilience of Emerging and Developing Countries: Systemic Interlocking, Currency Swaps and Geoeconomics

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The vulnerability/resilience nexus that defined the interaction between advanced and developing economies in the post-WWII era is undergoing a fundamental transformation. Yet, most of the debate in the current literature is focusing on the structural constraints faced by the emerging and developing countries (EDCs) and the lack of changes in the formal structures of global economic governance. This article challenges this literature and its conclusions by focusing on the new conditions of systemic interlocking between advanced and emerging economies, and by analysing how large EDCs have built and are strengthening their economic resilience. We find that a significant redistribution of ‘policy space’ between advanced and emerging economies have taken place in the global economy. We also find that a number of seemingly technical currency swap agreements among EDCs have set in motion changes in the very structure of global trade and finance. These developments do not signify the end of EDCs’ vulnerability towards advanced economies. They signify however that the economic and geoeconomic implications of this vulnerability have changed in ways that constrain the options available to advanced economies and pose new challenges for the post-WWII economic order.

Advanced economies should accommodate EDCs’ concerns in their economic and monetary policies, in order to avoid a new global economic meltdown.
Small and medium developing countries must exploit the new ‘policy space’ created through the competition between Bretton Woods and Brazil, Russia, India, China and South Africa (BRICS)-led financing initiatives.
Global economic institutions must find ways to deal effectively with the hypervolatility generated by short-term capital flows in order to avoid a new global economic crisis.
By extending and strengthening the existing network of bilateral and plurilateral currency swap agreements, EDCs can reduce the vulnerabilities generated by the dominant role of the US dollar in international trade and finance.