The myth of decoupling: emerging economies hit a wall¶
Core Argument¶
The central thesis is that the theory of "decoupling" — the claim that emerging economies, particularly the BRICs, could sustain independent growth trajectories insulated from the crisis in the US and Europe — has been empirically falsified. Booth argues that far from being separate, the world economy is intrinsically interlinked through the circuits of capital. The slowdown in China, India, Brazil, and elsewhere is not a contingent policy failure but a necessary new phase of the world crisis of capitalism. The apparent dynamism of the "emerging" world was always parasitic on the same credit-fuelled consumption and overaccumulation that generated the 2008 crash in the West. When the US Federal Reserve signals the tapering of quantitative easing, the contradictions ricochet back across the globe, revealing the unity of the crisis beneath the unevenness of its expression.
Theoretical Grounding¶
The analysis is grounded in Marx's law of the tendency of the rate of profit to fall, though it is deployed implicitly rather than mechanically. The key mechanism is overaccumulation: the Chinese state's Keynesian stimulus after 2008 did not resolve the underlying crisis of overproduction but merely postponed it by pumping fictitious capital into construction and heavy industry, generating ghost cities, excess capacity, and collapsing commodity prices. The article draws on Lenin's theory of combined and uneven development — not as a static typology of "advanced" versus "backward" economies, but as a dynamic, dialectical process in which crisis migrates, mutates, and rebounds across national boundaries. The critique of decoupling is also a methodological intervention: it rejects the empiricist tendency to read national growth rates as evidence of systemic health, insisting instead on the totality of the world market as the unit of analysis. The piece sits firmly within the Trotskyist tradition's insistence that capitalist crisis is worldwide in character, and that national "solutions" — whether Keynesian stimulus or austerity — are merely different moments of the same contradictory process.
Conjunctural Relevance¶
The article was written in August 2013, at a specific inflection point: the US Federal Reserve's announcement that it would begin "tapering" its quantitative easing programme. This triggered capital flight from emerging economies, currency collapses (the Indian rupee fell 13% in three months), and rising borrowing costs. Booth connects this to the earlier phase of the crisis: the Chinese stimulus of 2008–2009, which drove demand for raw materials and fuelled booms in Brazil, Indonesia, South Africa, and Australia. By 2013, that stimulus had generated overcapacity in Chinese coal and steel, a shadow banking crisis in cities like Shenmu and Wenzhou, and a debt-to-GDP ratio approaching 200%. The article cites specific data: Thailand's household debt rising from 55% to 80% of GDP between 2009 and 2013; Indonesia's current account deficit at its worst since 1996; Indian growth halved to 4–5% with 10% inflation. The conjunctural claim is that the "taper tantrum" was not an exogenous shock but the internal working-out of contradictions created by the previous phase of crisis management.
Where the Argument Continues¶
The article is an early statement of a theme that runs through IDOM's coverage of the 2010s: the crisis of the Chinese model, the fragility of "emerging market" growth, and the impossibility of a national capitalist solution to a world crisis. It connects directly to Booth's earlier pieces on China's "long march to capitalism" and the build-up of contradictions in the Chinese economy. The argument is developed further in subsequent IDOM articles on the 2015–16 Chinese stock market crash, the 2018 trade war, and the post-COVID inflationary surge. The theoretical framework — combined and uneven development as a crisis theory, not a growth theory — is elaborated in the RCI's broader literature on the permanent revolution and the world economy. Readers should also consult the Against the Stream episodes on the BRICs and the global slump, which update the empirical picture through the 2020s.
Connections¶
- Marx, Capital Vol. 3: The tendency of the rate of profit to fall and the theory of overaccumulation.
- Lenin, Imperialism, the Highest Stage of Capitalism: The export of capital and the uneven development of the world market.
- Trotsky, The Permanent Revolution: The methodological insistence on the world economy as a totality.
- Ernest Mandel, Late Capitalism: The analysis of credit-fuelled expansion and the role of fictitious capital in postponing crisis.
- David Harvey, The Enigma of Capital: On the spatial fix and the geographical displacement of crisis — though Booth would reject Harvey's reformist conclusions.
- IDOM articles: "China's long march to capitalism" (Booth, 2012); "The crisis of the Chinese model" (Booth, 2015); "The global slump and the return of the 1930s" (Booth, 2020).
Key Quotes¶
"Far from having a decoupled world economy, we are now seeing the results of an intricately and intrinsically linked global economic system. In this respect, the current economic troubles facing emerging economies are not an accident due to this or that policy, but are a necessary new phase of the world crisis of capitalism."
"The Chinese boom, having been a source of growth for the other BRICs and emerging economies, has now turned into its opposite and become a source of trouble for these same countries."
"With overproduction already existing on such a large scale across China, Asia, and the rest of the whole world, why would anyone invest in new production? With vast excess capacity at a global level and an abundance of commodities piling up that already cannot be sold, why would any businesses – in Asia or elsewhere – choose to invest in new industry? Instead, therefore, we see firms either hoarding money – i.e. simply sitting on stockpiles of idle cash – or choosing to invest their money in speculative activity."
"The process of capitalist crisis is not a smooth, linear one in which all national economies decline in tandem in an even manner. Rather, it is a dialectical process of combined and uneven development (or lack of development), in which the crisis reaches different stages in different places at different times."
"Everything the capitalists can do to restore economic stability simply leads to social and political instability, and vice-versa. But the ruling class in every country – whether it is Europe or Asia, America or Africa – has no option but austerity."
"We can now see clearly that when America – the largest economy in the world – sneezes, the emerging economies catch a cold, and this in turn mutates, spreads, and develops back across the globe."