So today s emerging market economies should be richer than today s advanced economies were back then, right?

Noting that some of those countries have evolved from the status of economies in transition into functioning market economies,

Less advanced and emerging market economies in Europe are facing major challenges.

The current spatial arrangement of agricultural land is unsustainable for the organization of modern market production.

Modern economies rely not on monopolies, but on competition. Contemporary Russians consume competitive products Nestle cereals, Mercedes cars, Hollywood movies.

Although China is the world s second largest pharmaceutical market after the US, some of the most effective modern medicines are not listed for sale in the market.

Key trends in emerging market economies include high and increasing unemployment and low employment rates.

Now investment constitutes only about a fifth of the national income in most modern economies, but it plays an absolutely vital role.

Small and vulnerable economies must not be abandoned to their fate in the current highly competitive market.

Almost without realizing it, we have drifted from having market economies to becoming market societies. The difference is this A market economy is a tool a valuable and effective tool for organizing productive activity.

But, working essentially alone, central banks have not been able to revamp properly the advanced economies growth engines nor do they have the tools to do so. Though many corporate leaders may still be unable to grasp the precise threats, they seem uneasy about the longer term collateral damage implied by running modern market economies at artificially repressed interest rates and with bloated central bank balance sheets.

As market shares increase, steady progress in lowering costs can be expected to continue through economies of scale.

To understand the logic of state capitalism, it is useful to recall some early examples not the socialist command economies or modern societies seeking to combat market failures, but ancient civilizations. Indeed, it seems that, like farming or democracy, state capitalism has been independently invented many times in world history.

Measures must be taken to limit the effects of the market economy, which is increasingly restricting our weak economies.

While large market economies are moving towards making resale price maintenance a rule of reason issue, rather than a per se illegal practice, such practices harm small economies like Costa Rica.

Market fragmentation in the more diversified economies is often due to intraregional investment priorities in non tradable sectors, particularly real estate.

In most African economies, the modern services sector has yet to become a driving force of economic growth, competitiveness and development, as in other developing and developed countries.

In many developing countries trade was not functioning as an engine of growth because their economies were based on a few primary products beset by weak demand, volatile prices and terms of trade which had been deteriorating for some time the whole situation was aggravated by infrastructure deficiencies, lack of modern technology, and poor access to market information.

But, in large part and with a few exceptions in Central and Eastern Europe emerging market economies improved their fiscal performance by reducing overall deficits, running large primary surpluses, lowering their stock of public debt to GDP ratios, and reducing the currency and maturity mismatches in their public debt. As a result, sovereign risk today is a greater problem in advanced economies than in most emerging market economies.

Small and vulnerable economies should be provided greater market access in agriculture and non agricultural market access (NAMA) to enable them to participate meaningfully in the multilateral trading system to mitigate disadvantages caused by the geographical handicap and smallness of their market and economy.

Eighth, some emerging market economies with weaker economic fundamentals may not be able to avoid a severe financial crisis, despite massive IMF support.

Rising income inequality, by redistributing income from those who spend more to those who save more, has exacerbated the demand shortfall. So has the asymmetric adjustment between over saving creditor economies that face no market pressure to spend more, and over spending debtor economies that do face market pressure and have been forced to save more.

Many forecasts suggest that by 2030, the four largest emerging market economies will have overtaken the G 7 in combined size, and that by 2050, today s emerging market economies will represent more than half the global economy and an even larger share of the world s population. These forecasts all assume that economic growth will be generated in cities.

They include increased competitiveness of firms, knowledge and technology acquisition, market expansion abroad and increased profitability, including as a result of economies of scale.

Yet we knew what we wanted to replace it with a system based on modern European democratic market values. Building democratic structures requires time, discipline, pain, and patience.

Modern materials allow us to do modern things.

Recognizing also the continuing need for favourable conditions for market access of exports from countries with economies in transition, in accordance with multilateral trade agreements,

Recognizing further the continuing need for favourable conditions for market access of exports from countries with economies in transition, in accordance with multilateral trade agreements,

Calls for effective representation of the developing and emerging market economies in the consultations and decision making on the reforms of the international financial architecture.

Deleveraging by highly leveraged firms such as hedge funds will lead them to sell illiquid assets in illiquid markets. And some emerging market economies despite massive IMF support will experience a severe financial crisis with contagious effects on other economies.

Recognizing also the continuing need to ensure favourable conditions for market access of exports from countries with economies in transition, in accordance with multilateral trade agreements,

Among the specific areas mentioned were preferential market access transfer of technology and capacity flexibilities for small economies to use subsidies and lower tariff reduction commitments.

The reliance of modern banking regulation on risk weighting is nowhere more important than in the mortgage market. If regulators get it wrong, the entire edifice could collapse yet again.

Think of Nokia, the mobile phone maker. Due to the economies of scale that the common market made possible, Nokia was able to exploit its inventions fully, while Germany s Siemens recently decided to give up on the mobile phone market.

Modern

There is no denying that advanced democracies largely failed to preempt the financial and sovereign debt crises, while most emerging economies pursued better economic policies. How can modern Western democracies impose strict fiscal discipline?

Why can t our wonderfully flexible market economies roll with the punches? Won t high prices cause people to conserve on consumption and seek out new sources of supply?

Thus, the pattern in emerging market economies that liberalized capital inflows has been lower investment in the modern sectors of the economy, and eventually slower economic growth (once the consumption boom associated with the capital inflows plays out). By contrast, countries like China and India, which avoided a surge of capital inflows, managed to maintain highly competitive domestic currencies, and thereby kept profitability and investment high.

Many people have been convinced that market exchange diminishes our humanity. Think of Charlie Chaplin s film Modern Times , in which the little tramp is literally a cog in the capitalist machine.

Legislative and regulatory changes, as well as extensive privatization of State owned assets in a number of emerging market economies and economies in transition in the 1990s, and foreign acquisitions of distressed corporations after financial crises, supported the growth in foreign direct investment (FDI).

These are an anemic, below trend, U shaped recovery in advanced economies, as firms and households continue to repair their balance sheets a stronger, V shaped recovery in emerging market countries, owing to stronger macroeconomic, financial, and policy fundamentals. That adds up to close to 4 annual growth for the global economy, with advanced economies growing at around 2 and emerging market countries growing at about 6 .

Indeed, the stock market is an important component of any modern economy. But we should not make plans that rely on high returns, as many (including some governments) appear to be doing.

It has become apparent, however, that emerging market enthusiasts underestimated at least two critical factors. First, emerging economies motivation to transform their growth models was weaker than expected.

But growing inequality is not inevitable. There are market economies that are doing better, both in terms of both GDP growth and rising living standards for most citizens.

Emphasis on trade liberalization without simultaneous market access and capacity building investment is premature, as a policy package aimed at a stronger regionalization of national economies is required.