Reasons for the Crisis: Message 5/10

v) The export-led development model needs rethinking.  

The rich world's absorptive capacity will not come back to its previous level for a while, if ever.  Emerging markets will need to rebalance their sources of growth towards domestic and "south-south" demand.  The new internal reliance will not apply just to output;  it will also apply to inputs, as foreign savings will not be available to fund investment.  This will be accompanied by an appreciation of the real exchange rate in developing countries, as the price of tradable goods will be depressed and calls for their subsidization will multiply (directly, through trade protection, undervalued currencies, or financial repression).  Completing a new round of trade negotiations will become more difficult.   Small economies will suffer the adjustment the most.