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For Adrian Wooldridge , management editor at The Economist , the top economic story of the early 21st Century is that of liberal capitalism "in crisis," and the emergence of a new model of capitalism in emerging economies. Wooldridge calls this new model "state capitalism." This is not, he points out, a return to the "bureaucratic" capitalism common in developed economies before the 1970s. Rather, today's state capitalism is more of a hybrid model, where there are strong state controls but also great appreciation for market forces. Wooldridge, better known to some of us as The Economist 's Schumpeter columnist, discusses state capitalism here: Read The Economist's special report on "state capitalism's global reach" here .

Since 2008, some Latin American economies--we're looking at you, Brazil--have managed to do quite well relative to the economies in other regions. But as we see China and India losing a bit of momentum, might these Latin American nations be more vulnerable to global slowdowns? Paulo Levy of IPEA , the applied economic research institute of the Brazilian government, thinks there is a good chance that Latin American economies will have another year of strong performance. At Project Syndicate , he predicts 4% growth over the year. That's not a stunning figure, but it is likely to be well ahead of the pace elsewhere. Levy: One reason for this prediction is that abundant liquidity in international markets and continuing high demand from China and India may prevent commodity prices – especially for agricultural products – from falling as much as they did during the 2008-2009 crisis. Gains in terms of trade have been crucial for growth in Latin America, given the region’s low domestic saving rates, because they encourage investment but have relatively little negative impact on current-account balances. Strong capital inflows, especially of foreign direct investment, and terms-of-trade recovery since 2009 have made the region less vulnerable to external shocks – that is, to recurrence of the abrupt capital-flow reversal that occurred in late 2008 and early 2009. More importantly, most Latin American countries now have in place counter-cyclical measures to mitigate any negative external impact. For example, many countries that were tightening their monetary policy when the first signs of turbulence emerged have either put interest-rate hikes on hold, or, like Brazil, have already started to reduce rates. Most Latin American countries’ recent adjustments, moreover, have prevented their budget positions and current-account deficits from becoming sources of vulnerability. This appears to be the case, for example, in Peru, where sound fiscal policies have kept deficits and inflation under control. It is also true in Colombia, where strong budget revenues could allow for a temporary spending boost to counter external risks. Noteworthy exceptions are Argentina and Venezuela, where macroeconomic tensions have reduced the scope for counter-cyclical action, and Mexico, whose fate is bound by extensive trade links to that of the United States. Read Southern Resilience here .

We find it hard to talk about China without talking about India. Sometimes, for the sake of economic comparison, we pit the two against each other. Other times we pit the two, often along with South American kindred spirit Brazil, against the developed economies of the West. india and China seemed to zag while the rest of the world zigged during the global economic crisis, and were able to grow while the US, China, and Europe stagnated. But as 2011 ends, the two growing powerhouse economies are showing some vulnerability. At Project Syndicate , Stephen Roach warns us not to carried away by concerns that China and India will struggle in the coming year. He is a little worried about India's ability to avert crisis. As for China, Roach says not to expect a "hard landing," as China's policymakers have taken necessary action to ward off any major downfall: That is particularly evident in Chinese officials’ successful campaign against inflation. Administrative measures in the agricultural sector, aimed at alleviating supply bottlenecks for pork, cooking oil, fresh vegetables, and fertilizer, have pushed food-price inflation lower. This is the main reason why the headline consumer inflation rate receded from 6.5% in July 2011 to 4.2% in November. Meanwhile, the People’s Bank of China, which hiked benchmark one-year lending rates five times in the 12 months ending this October, to 6.5%, now has plenty of scope for monetary easing should economic conditions deteriorate. The same is true with mandatory reserves in the banking sector, where the government has already pruned 50 basis points off the record 21.5% required-reserve ratio. Relatively small fiscal deficits – only around 2% of GDP in 2010 – leave China with an added dimension of policy flexibility should circumstances dictate. India, however, "is more problematic," Roach notes: India is more problematic. As the only economy in Asia with a current-account deficit, its external funding problems can hardly be taken lightly. Like China, India’s economic-growth momentum is ebbing. But unlike China, the downshift is more pronounced – GDP growth fell through the 7% threshold in the third calendar-year quarter of 2011, and annual industrial output actually fell by 5.1% in October. But the real problem is that, in contrast to China, Indian authorities have far less policy leeway. For starters, the rupee is in near free-fall. That means that the Reserve Bank of India – which has hiked its benchmark policy rate 13 times since the start of 2010 to deal with a still-serious inflation problem – can ill afford to ease monetary policy. Moreover, an outsize consolidated government budget deficit of around 9% of GDP limits India’s fiscal-policy discretion. Read Why India is Riskier than China here .

Few economists truly argued that austerity was a cure-all for Europe's debt woes (though we forgive anyone who interpreted news reports as suggesting just that), it was expected to be the answer for a lot of the problems in the region, and, to a certain extent, around the world. Heard on the Street Columnist Richard Barley says one big problem for Europe is that currently "solutions that might work are solutions that are politically unacceptable." Barley and Nick Hastings , of Dow Jones Newswires, discuss dropping confidence in Europe, the impact of the Euro slump on the global economy, and the central role that Germany must play in efforts to turn the corner:

Olivier Blanchard , Chief Economist at the IMF , sees a lot to be worried about in the global economy. But first and foremost are the troubles in Europe. He has his firm opinion on what needs to happen to mitigate greater crisis, and the key institution in his mind is the European Central Bank. Blanchard had Tea with the Economist and discussed his take on what measures should be taken, and also on the role of Wall Street today:

The OECD 's composite leading indicators (CLIs) are "designed to anticipate turning points in economic activity relative to trend." The CLIs for August, just released today, are now pointing toward a global slowdown: Anything below that 100 marker points to economic activity below the long term trend. The August numbers show most countries in the OECD already below the line. India, Brazil and China are all below the line as well, with India and Brazil well below. The US, Germany, and Russia are looking better, but are also trending toward slowdown. Japan, is an outlier. Its CLI "continues to indicate a potential turning-point in economic activity." See the specific CLIs for OECD countries here .

The IMF's World Economic Outlook shows a worrying global economic slowdown, led by Europe and the US. Among the many causes cited for slowing economic activity is the lack of demand in the private sector. The IMF's researchers suggest that they expected a quicker "handover from public to private demand." The tsunami and earthquake damage in Japan also bears some of the blame, as do disruption in oil supplies in North Africa this year. A lasting, and troubling factor is the lack of confidence on the part of consumers and businesses in developed economies of the West. The ripple effects of the dip in confidence are being felt around the globe. Note the impact on growth, as shown in the IMF's Growth Tracker : From the report: Worryingly, various consumer and business confidence indicators in advanced economies have retreated sharply, rather than strengthened as might have been expected in the presence of mostly temporary shocks that are unwinding. Accordingly, the IMF’s Growth Tracker (Figure 1.4, top panel) points to low growth over the near term. WEO projections assume that policymakers keep their commitments and the financial turmoil does not run beyond their control, allowing confidence to return as conditions stabilize. The return to stronger activity in advanced economies will then be delayed rather than derailed by the turmoil. Read the World Economic Outlook, and watch video of the IMF staff discussing their findings, here .

Three years ago, as we were wondering whether we were witnessing the complete meltdown of the financial services industry, Bank of America bought Merrill Lynch and Barclays took over the bankrupt Lehman Brothers. Steven Davidoff --professor at the Michael E. Moritz College of Law at The Ohio State University--looks back at those deals, and he argues Barclays won, and Bank of America did not. And the primary reason, Davidoff writes at the New York Times DealBook blog, is because Barclays was more patient: Things would have been different had Bank of America waited. It would at a minimum have paid a bargain basement price for Merrill, one that was tens of billions lower at least. There is still some talk of spinning off Merrill Lynch. The operations of Merrill have already been combined with Bank of America, so a real separation would be complicated. And the recent reorganization of the bank’s management — which puts Merrill Lynch’s wealth management business under David Darnell, the co-chief operating officer, but Bank of America-Merrill Lynch under the other chief operating officer, Tom Montag — also makes a split more difficult. Ultimately, Barclays made a better deal by doing what should be done in an acquisition, carefully assessing the future liabilities and limiting them as much as possible. But let’s be clear. Barclays did this only because it was forced to by the regulator. The first lesson of Bank of America and Merrill Lynch is that impatience and a chief executive’s hubris can lead to some very bad decisions. And regulators can sometimes stop these heady moves. Read The Merrill Lynch and Lehman Deals, 3 Years Later here .