Why Greece Sells Itself as Paraguay: Foroohar

Europe has had plenty of embarrassing moments in recent weeks. Aside from the inept response to the Icelandic volcano, which also shot a cloud of jokes onto Facebook (my favorite: "Europe to Iceland: we said send cash, not ash!"), one of the lowest points had to be Greece's attempt to sell itself as an "emerging market." That was the pitch to investors this month, as the Greeks began offloading billions of dollars' worth of bonds by advertising that their yields (and their risks) were higher than those of any number of poor developing nations.

It's truly a sad day when the cradle of civilization has to rebrand itself as Paraguay. In keeping with its new status as a pauper nation, Greece is likely to be bailed out by the International Monetary Fund and the European Union for a total of $60 billion. Yet it isn't even the biggest basket case in the Western world. Italy suffers from a debt five times as large, and is also teetering on the brink of insolvency thanks in large part to its truly absurd leader—Silvio Berlusconi is a distressed asset if there ever was one—and a finance minister whose suggestions for improving the economy have included offering amnesty to any Italian willing to bring home his or her illegally acquired assets. (Mafiosi, call your accountants now.) No wonder banks such as Morgan Stanley are speculating that Germany, the biggest continental economy, might actually pull out of the euro zone in order to avoid having to bail out any more of its neighbors.

America and Britain shouldn't laugh. The U.K. has run up debt faster than any major economy over the last eight years, and the U.S. isn't far behind. Both are in danger of losing their AAA credit ratings if things don't improve. According to the Council on Foreign Relations, America is now the world's major financial gambler, as the government's portfolio has been filled in recent years with riskier assets—the U.S. tends to hold more potentially volatile equities, for example, than other big nations. Poor countries, on the other hand, are spending more on "safer" bets, including U.S. T-bills, which are now 57 percent foreign-owned.

The whole idea that developing nations are more dangerous, financially speaking, is fading. World Bank president Robert Zoellick described the issue bluntly two weeks ago when he portrayed the financial crisis as the death knell of the old concept of the Third World as a separate entity, just as 1989 was for the Second World of communism. Countries such as Mexico and Poland now have better credit ratings than Greece. China's $2.5 trillion in foreign-exchange reserves dwarf the lending resources of the IMF, even after they were tripled to $750 billion during the crisis. Countries including Brazil, Chile, and South Korea barely slowed during the credit crunch and are back on track for fast growth.

The reason: these nations learned the lessons of their own banking and sovereign-debt crises of the 1980s and 1990s. They spent the ensuing years paying down debt and borrowing more only to buy useful stuff—like roads, railways, and wireless broadband—to propel their economies along even faster. Meanwhile, travelers driving the potholed expressways that lead to the major New York airports, or trying to get a clear mobile-phone connection en route, could be forgiven for thinking they are in Moldova.

Far from drowning in debt, emerging-market consumers have only just begun to spend. Every day a new headline confirms the trend—Brazil recently became Avon's single biggest market. Many luxury brands now earn more revenue from China than the United States. On the other hand, few even bother marketing themselves in troubled little Western nations like Greece.

In some ways, the world is not turning upside down, it's just reverting to form. The Hellenic Republic has been in default for more than half the years since it became a modern nation in 1832. So Western financial supremacy is hardly the natural order of things. Prior to the 1500s, Chinese and Indian per capita GDP were higher than Europe's, and despite major Western advances over the next 200 years, their economies remained larger until the 1800s. Now things are reverting to the way they were. By 2050, China, India, and a few other key developing countries will represent 60 percent of the global economy, and the vast majority of the world's middle-class consumers. No wonder big U.S. and European firms are moving executives to the cradles of the new Asian economy, such as Shanghai and Mumbai. Not to Athens.