For Greece, a Dubious Distinction

Is Greece an “emerging” market?

“Submerging” might be more like it. But on Tuesday, MSCI, proprietors of stock indexes around the world, officially classified Greece as “emerging.”

Notwithstanding what it sounds like, MSCI was not offering a compliment to the poor Greeks.

Instead, the name reflects a trend to ever more positive names for what might be called “other than developed” economies.

Once they were “undeveloped,” which really sounded nasty. Then they became “developing,” which implied progress was being made whether or not it was. Then they became “emerging.” Each term sounded better than the last.

MSCI has another group, under emerging, known as “frontier.”

Which group a country is in can matter because institutional investors compare their performance to the various MSCI indexes. There is no frontier index, which could discourage investment in those countries. Lately, the emerging index has been underperforming the developed index.

On Tuesday, MSCI decided that Greece no longer deserves to be classified as “developed.” It was transferred to “emerging.”

Of course, MSCI does not really mean Greece is emerging. Going back to the old label of undeveloped would be closer to what it is trying to say, but it would not sound as good. “Undeveloping” might be appropriate, but we don’t have negative titles anymore.

The other changes made Tuesday included the demotion of Morocco from “emerging” to “frontier,” and the promotions of Qatar and the United Arab Emirates to “emerging.”

MSCI says it is thinking about dropping Egypt down to “frontier” from “emerging,” and might raise South Korea and Taiwan to “developed” from “emerging,” but won’t act until next year at the earliest. China, which remains “emerging,” might not like to see Taiwan move up.

It would be nice if we had terminology that sounded neutral. What we now have tends to make every country sound good. Call it the Lake Wobegon effect.