The saying that we must study history or be doomed to repeat it certainly holds true for emerging market exchange traded funds (ETFs), which can look to Ireland for a few lessons.
In Ireland, one in eight is unemployed, the banking system remains fragile and defaults on home loans are on the climb, report Michael O’Sullivan and Rory Miller for The National. The easy flow of money over the last decade has not been invested prudently. Instead, Ireland, and most eurozone members, have witnessed their research and development spending as a percentage of GDP drop to 1.84%. [ETFs Fall Despite Ireland’s Bailout.]
Over here, President Obama has promised more than 3% of GDP to research and development, with a R&D-related tax incentive to boost activity. However, developed economies are struggling with poor balance sheets, which leaves little to further investments into the future.
Are emerging markets paying attention?
The more well-off emerging markets are purchasing assets and investing in infrastructure of the indebted developed economies. Money is being put to physical infrastructure and other “intangible” areas, such as sports franchises and financial services. It may be smarter for developing economies to put their wealth into their own education, health care, technology, innovation and financial services as a way to improve their global competitiveness. [Emerging Market Small-Cap ETFs Play Growth Story.]