Maintaining Economic Momentum in Emerging Markets

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Posted on 2/4/2014
India has a growing economy, but some communities are still very poor.
India has a growing economy, but some communities are still very poor.

For many businesses around the world, emerging markets such as Brazil, Russia, India and China — known collectively as BRIC nations — represent the new frontier of economic opportunity. Western countries have made diversifying and expanding into these markets a primary business objective because of these nations' resilience in the face of economic instability worldwide and the speed of financial growth. However, income inequality and poverty remain persistent problems in many emerging markets, and this could ultimately affect the accuracy and reliability of economic forecasts.

Misplaced Optimism

In 2008, when the full extent of the global financial crisis became known, many economists speculated that BRIC nations and other emerging markets would be shielded from the worst of the financial fallout because of their limited dependence on Western economic structures. According to the Council on Foreign Relations, this belief led to a misplaced optimism in both the strength and resilience of these markets, and today, many financial projections are still based on facts that remain out of date.

In the past six years, Brazil and India, countries in which ChildFund works, have achieved impressive financial growth, although there's still a chasm between the richest and poorest classes in both countries. In Brazil, for instance, approximately 26 percent of the country's population of 192 million lives in poverty. Many families lack access to nutritious food, clean drinking water and lifesaving health care. Similarly, India's economy has grown substantially in recent years, but with a population of more than 1 billion, a quarter of which lives in poverty, the country faces numerous social and economic challenges now and in the years ahead.

Cheap Labor

One of the many reasons why emerging markets are so attractive to Western companies and foreign investors is the potential for reduced-cost labor. For the past 30 years, China has been the world's manufacturing powerhouse, but conditions faced by many workers are exploitative and often benefit only the companies that employ their services.

The same is true in India. Millions of families are affected by economic hardships, forcing children to sacrifice their education to work and support their families. For many children, work is dangerous, and some have little choice but to sift through piles of discarded electronics in search of copper wiring, which can later be sold. Child labor, although it's been prohibited by Indian law, is still a common practice.

Disparities between the income of the poorest and wealthiest families is just one aspect that many economists failed to consider at the height of the global financial crisis. According to the CFR, the rapidly shifting economic landscapes of developing nations and emerging markets makes truly accurate predictions regarding the potential of these regions difficult.

Maintaining Momentum

ChildFund works in some of the world's poorest countries to fight child poverty and help families who need assistance. Through our child sponsorship program, ChildFund has helped thousands of children and their families break the cycle of generational poverty and lead healthy, happy lives.

Becoming a child sponsor is one of the best ways you can invest in the life of a child living in poverty. Just $28 per month — around $1 per day — will allow us to provide vulnerable children with nutritious food, clean drinking water and lifesaving health care. In addition, your generosity will enable us to expand our early childhood development programs, support maternal health and provide a range of other important resources that will make a lifetime's worth of difference to families who need assistance. With these needs fulfilled, families have a greater chance to take advantage of economic opportunities and become self-sufficient.