Emerging Markets’ Victimhood Narrative

Jan. 31 (Bloomberg) -- From Istanbul to Brasilia to Mumbaicomes a crescendo of complaints about dollar imperialism. Headsof state and central bank governors allege that the policies ofcentral banks in industrial countries, especially the U.S.Federal Reserve, pursued in self-interest, are wreaking havoc inemerging-market economies. This allegation is mostly unfair.Emerging markets aren’t hapless and undeserved victims; for themost part they are simply reaping what they sowed.

Start first with the strange symmetry of the complaints.When the Fed relaxed its policy via quantitative easing,emerging-market countries, especially Brazil, complained aboutthe wall of money flooding their markets and putting upwardpressure on their currencies. Now, with the Fed slowly unwindingthe program, the complaint from emerging economies is thatcapital is fleeing. The Fed is damned regardless of whether itdams the supply of dollars or undams it. The Fed has receivedscant word of thanks for propping up the U.S. and, hence, theworld economy at a time when policy elsewhere (especially inEurope) was so counterproductive.