Over at Project Syndicate, Mohamed El-Erian has penned a great piece on the two distinct policy choices facing decision-makers in emerging economies as developed countries in the west continue to suffer from low growth, crippling sovereign debt and extreme market volatility. According to El-Erian, emerging economies can either “compensate for the global weakness by turbo-charging their own internal demand through aggressive fiscal stimulus”, in the process moving from production to consumption-led growth.

On the other hand they can choose to “minimize the deterioration in their trade surpluses, maintain competitive exchange rates, and safeguard their foreign reserves and net-creditor positions”; this choice would however maintain or even increase the current pressures on the global economy.

El-Erian predicts that “emerging-market economies will take some steps, including interest-rate cuts, to safeguard domestic growth. They will also signal willingness to help the West financially. But such steps, while notable, would prove insufficient to counter fully the slowdown emanating from the West; and it certainly would not materially change the outlook for the United States and Europe.”

Mohamed A. El-Erian is CEO and co-CIO of PIMCO, and author of When Markets Collide.