Trading Places: Why Emerging Markets Are Now the Safer Bet
Jeremy Hunt’s book ‘Can We Be Great Again?’ is not the political slogan its title might suggest but a careful look at Britain’s economic weaknesses and what must change. He rejects the idea of inevitable decline and argues that the UK still has the ability to prosper if it restores discipline in its public finances. His central concern is debt. He warns that Britain risks a “doom-loop,” where markets dictate terms because governments borrow too much. His solution is simple: over the life of a parliament, borrowing should not grow faster than the economy. For Hunt, this is the basis of credibility and stability.
The UK’s debt now stands close to the size of its economy at about 100 per cent of GDP. France is higher at more than 110 per cent, and the United States exceeds 120 per cent. These figures were once linked with countries in crisis, not advanced economies. The drivers are long-term: ageing populations, rising pension and health costs, and fewer workers to fund them through taxes. Instead of investing in growth, governments are borrowing heavily just to pay for the present. Hunt’s message is that without change, the future is being sacrificed.
This problem is not unique to Britain. Across the developed world, debt levels are rising while growth prospects are shrinking. What makes this striking is how the picture compares with many emerging economies. For years, their bonds were viewed with caution, often seen as prone to shocks or political uncertainty. Yet the gap has narrowed, and in some cases the advantage has shifted.
Demographics are one reason. While Europe, Japan and the US face ageing populations and shrinking workforces, countries across Africa, Asia and Latin America are far younger. A large working-age population creates the potential for more output, stronger consumer markets and a greater capacity to repay debt over time. Demography is not destiny, but it provides an advantage that developed economies lack.
Fiscal discipline is another factor. Instead of letting borrowing spiral during the pandemic, many emerging economies kept tighter control. Debt ratios remain far lower. Mexico’s public debt is about 50 per cent of GDP, Chile’s around 38 per cent, Saudi Arabia’s 27 per cent and the UAE close to 30 per cent. These levels stand in sharp contrast to the UK, France and the US, which now sit at or well above 100 per cent. Lower debt gives emerging markets more room to manoeuvre in downturns and strengthens their standing with investors.
Hunt’s call for fiscal responsibility underlines how far developed economies have drifted. The values he wants Britain to adopt—careful spending, restraint in borrowing and a focus on long-term growth—are already visible in parts of the developing world. For investors, this means emerging market debt can no longer be dismissed on old assumptions. In many cases, these countries now offer a combination of stronger demographics, lower debt and improving credibility that makes them an increasingly important part of the global landscape.
Risks remain, from politics to weaker institutions, but judged against ageing and indebted Western nations, many emerging economies now look more sustainable. The labels of “safe” and “risky” no longer fit neatly. As Hunt argues for Britain to restore its discipline, investors may find that the very qualities he prizes are already embedded in economies such as Mexico, Chile, Saudi Arabia and the UAE.
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