DRAFT Emerging Economies (2021)

Winter Session Professor Joseph Foudy Classroom: TBD [email protected] Class Time: TBD Office: KMEC 7-66 Office Hours: Before/After class, by appointment Telephone: (212) 998-0970

COURSE GOALS

This course covers the economic development and market structure of various emerging economies. The course is designed to cover many of the most important emerging markets in the world. Asia, especially China and India, receives a strong focus given its size and pivotal role in the world economy. However, the markets of Latin America, Africa, Eastern Europe and Middle East all receive coverage. Emerging markets are now responsible for the lion’s share of world GDP growth. Success in them is critical for the strategies of multinational firms. Similarly, they are an important part of most investment portfolios.

The course attempts to answer a number of important questions about these markets:

-What are the key challenges facing emerging markets today? -What are the key drivers for economic growth in different countries? -What is their future potential and how are they likely to evolve over the next few decades? -How will demographic trends impact the attractiveness and growth prospects of these markets? -What role does the government, especially the state-owned sector, play in their economies? -More generally, how does politics impact markets, especially for foreign firms operating there? -How do financial markets and corporate governance vary by country and what impact do they have on firm strategies? -Why are conglomerates more common in emerging markets and what role do they play? -How do consumer behavior and product markets vary by income and region?

COURSE MATERIALS

There are two required items for this course:

*HBS Reader https://hbsp.harvard.edu/import/689906 *Ruchir Sharma, Breakout Nations: In Pursuit of the Next Economic Miracle (W.W. Norton & Co, 2013).

All other materials will be on NYU Classes or handed out in class.

2

TEACHING PHILOSOPHY

I am hopeful that we can have extensive class discussions. To that end, it is important to complete the assigned readings prior to coming to class. The readings are designed to provide you with both a general background and greater specifics on certain issues than I can present in class. We have assigned memos for you to complete for some of the sessions to aid in these discussions.

RESPONSIBILITY, CONDUCT AND ATTENDANCE

I presume that we are all adults. There are several implications of this: • As a teacher I have the responsibility to organize and present the material and to facilitate your learning. • As a student you have responsibility for your own learning.

Honor Code: You are expected to adhere to the Stern MBA Code of Conduct.

For the written assignments in class, students should take special care to avoid plagiarism. All work should be a student’s own. If you ever have any questions at all regarding incorporating material into papers or memos, please do not hesitate to contact the professor.

We expect all students to be present for class or to contact me ahead of time if you will be unable to attend. If you cannot attend a particular class session, please let me know in advance.

Laptops and cell phones are not permitted during class sessions. Text messaging and emailing during class is not permitted. If you need to communicate externally, please feel free to step out of class as needed.

GRADING

The course grade will be based on the following items: 4 Memos (choose 4 of 6) 20% Class participation 20% Final Paper 60%

Memos should be approximately 1-2 page double spaced, submitted online via NYU classes assignment tab. Details for the final paper will be posted later.

ATTENDANCE/PARTICIPATION

Participation is a critical part of the seminar and a part of your grade. As there are only six class meetings, students are expected to miss no more than one class. (See teaching philosophy above.)

3 COURSE OUTLINE

Class 1: Lessons on Emerging Markets as well as Russia, Saudi Arabia and Natural Resource Traps

How do emerging markets differ from developed economies? What are their key features? What are some important differences among them? What is a natural resource trap? What are the political risks of investing in emerging markets?

Memo Prompt: What similarities do you see between Russia and Saudi Arabia? In the case of Saudi Arabia, critically assess the chances for success of the Vision 2030 plan.

Case:

“Saudi Arabia: Vision 2030” HBS Case 9-718-034

Other Readings (Text and NYU Classes):

-G Anderw Karolki, Cracking the Emerging Markets Enigma, (Oxford: Oxford University Press, 2015) Excerpts -Yaroslav Trofimov, “A Social Revolution in Saudi Arabia,” The Wall Street Journal, November 15, 2019 -Bill Alpert, “Crime and Punishment in Putin's Russia,” Barrons, April 16, 2011 -Andrew Kramer, “Selling Real Estate in Russia? Are you Crazy?,” The New York Times, December 25, 2018 Gwynn Guilford, “The Mystery of Russia’s Missing Wealth,” Quartz, July 22, 2018

Recommended:

Tarun Khanna and Yshay Yafeh, “Business Groups in Emerging Markets: Paragons or Parasites,” Journal of Economic Literature, June 2007

4 Class 2: China

What was China’s history until 1979? How did it take off economically? What are the significant economic issues for the country moving forward?

Memo Prompt: What are the greatest challenges you believe China faces over the next decade or so? Is the party supporting or hindering China’s economic development today?

Case:

“China: The New Normal,” HBS Case 9-716-080

Other Readings (Text and NYU Classes):

-Sidney Leng, “China could struggle to keep growth above 4%,” South China Morning Post, November 28, 2019 -Gabriel Wildau, “China’s state-owned zombie economy,” Financial Times, Feb 29, 2016 -Issaku Harada, “China’s Debt Overhang tests Xi’s ‘quality growth’ strategy,” Nikkei Asian Review, March 6, 2018 -Stephen Cecchetti and Kermit Schoenholtz, “China: Mao Strikes Back,” Money and Banking Blog, January 28, 2019

Class 3: India’s Economic Development Model, China-India Comparison

Why did India’s economy take off after decades of stagnation? How has India’s political system stymied reforms? What are India’s strengths compared to China?

Memo Prompt: Will India become the next China (e.g. grow in the range of 6-10% for the next few decades)? Why or why not?

Case:

“India: State Capacity and Unity in Diversity,” HBS Case 9-719-061

Other Readings (Text and NYU Classes):

-Devesh Kapur, “Why Does the Indian State Both Fail and Succeed?” Journal of Economic Perspectives, Winter 2020 -Preetika Rana, “Ikea’s India Bet Runs into a thicket of rules,” The Wall Street Journal, February 23, 2016 -Corinne Abrams, “You have to actually cut open Mumbai’s belly,” The Wall Street Journal, January 6, 2019

Recommended:

Kaivan Munshi, “Caste and the Indian Economy,” Journal of Economic Literature, December 2019

5 Class 4: Southeast Asia (ASEAN region)

What are the common historical factors influencing the economies of Southeast Asia? What are the key differences?

Memo Prompt: How has the growth of China impacted Southeast Asia? How has economic populism impacted the region?

Readings (Text and NYU Classes):

-Breakout Nations, Chapter 9 “On The Tiger Road” -William Pesek, “Populism threatens Thailand again,” Nikkei Asian Review, November 29, 2018 -Laura Villadiego, “Thailand Chases Chinese Money, but at What Cost,” South China Morning Post, July 3, 2017 -Jeremy Grant, “Malaysian Airlines’ Long Haul,” The Financial Times, August 24, 2014

Class 5: Latin America and Eastern Europe: Economic Challenges and Populism

Why has Latin America appeared to be caught in the middle income trap? In Eastern Europe, which states have thrived since the collapse of Communism? Turkey was a relative growth star until recently. What changed?

Memo Prompt: Compare Mexico and Brazil. Why did populists (on the left and right) win election in each country recently? Which country are you more optimistic about and why?

Case:

“Mexico: “A Mosaic of Different Realities”,” HBS Case 9-717-051 Sebastian Edwards, “On Latin American Populism, and Its Echoes around the Word,” Journal of Economic Perspectives, December 2019

Other Readings (Text and NYU Classes):

Pick One Chapter: Breakout Nations, Chapter 4 “Is God Brazilian” OR Chapter 5 “Mexico’s Tycoon Economy” Pick One Chapter: Breakout Nations, Chapter 7 “The Sweet Spot of Europe” OR Chapter 8 “The Monophonic Voice of Turkey”

Recommended:

(Background update on Mexico): David Luhnow and Jose de Cordoba, “Mexico’s Polarizing President Presides Over Rising Violence, Flailing Economy,” The Wall Street Journal, December 7, 2019

6 Class 6: Africa and Frontier Markets

What are the main economic and political challenges facing Africa? How does the resource curse feed into political and ethnic divisions in Africa?

Memo Prompt: Sub-Saharan Africa was perhaps the fastest growing region of the world over the past 15 years (though due in part to the rise of commodities). How do you expect Africa and the country you chose for the case to perform over the next decade?

Case (Pick only ONE):

“South Africa: A Fractured Rainbow?” HBS Case 9-716-069 OR “Nigeria on the Move: Governing the “New” Economy,” HBS Case 9-716-073

Other Readings (Text and NYU Classes):

-Breakout Nations, Chapter 11 “The Endless Honeymoon” and Chapter 12 “The Fourth World”

Optional (Background update on Mexico): Norimitsu Onishi, “South Africa Crippled by Rolling Blackouts,” The Wall Street Journal, December 7, 2019

Final Paper Due Approximately One Week After Last Class