Friday, March 20, 2009

Is the U.S. a Developed or an Emerging Country?

Ian Bremmer and Sean West have an op-ed in today's Wall Street Journal called AIG and 'Political Risk.' I urge you to read it. While some people are upset that AIG employees got any bonuses at all, others are equally upset that the government has stepped in and threatened to take them away. The authors argue that the outrage by Congress and the Obama administration over the bonuses is a result of nothing more than political expendiency. It scores populist points. However, it also raises the risk for investors and does nothing to resolve the financial crisis.

Bremmer has been warning for several months now that Congressional actions represent the most important political risk investors face this year. I know Bremmer well so I sent him an email congratulating him on the article and expressing remorse that the U.S. suddenly seems hellbent on turning toward socialism. He replied by saying that what is going on is right up his alley because he has been studying emerging markets for twenty years. So there we have it. The world's most developed nation is behaving more like an emerging country.