Month: March 2026

The Big Mac Index: Global Currency Analysis (2000–2026)

 

The Big Mac Index (BMI) provides an insightful, if superficial, view of the value of international currencies and how countries manage them. The BMI, which has been compiled by The Economist magazine since 1986, compares the dollar price of a Big Mac sandwich in approximately 50 countries worldwide. It serves as an alternative measure of the relative cost of living, incorporating inputs from the farm, manufacturing, and service sectors, as well as taxes and regulations. Over time, it provides insight into the relative valuation of different currencies.

The chart below illustrates the change in the price of a Big Mac from 2000 to 2026. In the United States, the price of a Big Mac rose by 144% during this period—significantly more than the 98% increase in the U.S. Consumer Price Index (CPI). The chart highlights striking variations in price changes, ranging from a 300% increase in Poland to nearly no increase in Japan, Taiwan, and India.

The rankings of the index for the past 25 years for a selection of emerging markets (EM) and developed countries are shown in the table below. The table is color-coded: developed countries in black, EM commodity producers in red, and the remaining EM countries in green. This period spans an extraordinarily turbulent economic environment, including the China “Shock,” the commodity super-cycle, the Great Financial Crisis, the COVID-19 shock, and the beginning of deglobalization.

The last 15 years can be characterized as a period of “American Exceptionalism,” driven by the shale revolution and the global dominance of Silicon Valley’s tech titans, which led to significant dollar appreciation. At the same time, commodity prices were subdued. However, a long-overdue process of dollar weakening may have started in 2025.

Key Trends by Category

The table highlights several trends over this period, best observed through the color-coded categories:

 

  • Developed Countries: These economies have maintained a relatively narrow range of currency values relative to each other. Although the U.S. dollar has depreciated over the past year, it remains in the top third of the table, as it has consistently throughout the period. The Scandinavian countries, Britain, and Switzerland have stayed within a stable range near the top. Even Canada and Australia—both major commodity producers—have remained within a relatively tight range, though they are more volatile than other developed economies. A notable exception is Japan, which has experienced an extraordinary devaluation of the yen due to chronic deflation and quantitative easing. Furthermore, Japan is the only developed country (alongside its East Asian neighbors) consistently intent on managing its currency downward to maintain industrial competitiveness and exports.
  • Emerging Markets (Excluding Commodity-Dependent Countries): These countries can be divided into two distinct groups:
    • Mercantilist Economies: Taiwan, South Korea, China, Thailand, Malaysia, and Vietnam have prioritized export competitiveness. This has led to remarkable stability in the index, positioning them consistently in the bottom third. While these nations were among the biggest beneficiaries of hyper-globalization, they now stand to lose from deglobalization. The cases of South Korea and Taiwan are particularly striking: despite their increasing wealth, their currencies have become more competitive in BMI terms. Given their strategic alliances with the U.S., strong pressure from the Trump administration regarding tariffs and currency realignment is expected. These countries find themselves caught between the U.S. and China, facing the dual challenge of Chinese export competition and the threat of U.S. tariffs.
    • Market-Oriented Economies: Countries such as Turkey, Poland, India, and the Philippines show little commitment to currency stability. They experience broad exchange rate fluctuations—driven by volatile trade and capital flows—which can undermine export competitiveness. Poland, in contrast to the Asian mercantilists, has allowed for a consistent appreciation of the zloty as the nation has grown wealthier.
  • Commodity-Dependent Emerging Markets: These nations experience high levels of currency and economic instability. Over the past 25 years, free capital flows have exacerbated commodity-driven currency cycles, leading to extreme volatility due to “hot money” inflows and capital flight. This instability has contributed to acute deindustrialization in many of these economies. Argentina’s recent experience is particularly revealing: since 2010, Argentina has moved from the bottom of the table to the top third. Similarly, Brazil had one of the world’s most expensive Big Macs in both 2010 and 2015, exceeding even perennially expensive countries such as Sweden and Denmark. Among commodity-linked currencies, Indonesia stands out as an exception, behaving more like an “Asian Tiger” currency with relatively low volatility. Undoubtedly, the currencies of commodity producers will appreciate significantly if commodity prices continue to rally as they did during 2025.

Conclusion

In the current landscape of trade wars, shifting economic alliances, and increasing geopolitical tensions, currency realignment is becoming an essential tool for policymakers. The trends highlighted by the Big Mac Index reflect deeper structural shifts in the global economy—from the rise and fall of American exceptionalism to the challenges faced by both developed and emerging markets. As the forces of deglobalization take hold, nations will likely respond with a mix of tariffs, industrial policies, and monetary interventions to maintain competitiveness. The coming years will test the resilience of global currencies, determining which economies can adapt to this new era of economic realignment.

Global Industrial Policy and the Rise of the New Consensus

A new consensus has been building in Western policy and academic circles that, for both strategic and economic reasons, countries can no longer passively cede industrial capacity to committed mercantilist powers. Arguments in favor of restrictions on trade and capital flows—considered extremist during the neoliberal Washington Consensus (1980–2010)—have now moved into the mainstream. It has dawned on policymakers that not having an industrial policy is the worst kind of industrial policy, as it leaves a nation at the mercy of others.

This change in ideological climate provides a major opportunity for those countries that missed out on the globalization boom to return to relevance. Countries with large consumer markets, such as the United States, Brazil, India, and Indonesia, now have a chance to recapture domestic demand as they reshore industrial activities. Unfortunately, this is easier said than done, because mobilizing sustained political support for these policies remains a significant challenge.

The Fletcher-Fasteau Framework

Marc Fasteau and Ian Fletcher’s 2024 book, Industrial Policy for the United States: Winning the Competition for Good Jobs and High-Value Industries, has become a significant reference point in Washington’s policy circles, positioned as an “authoritative tome” for a new era of American economic strategy. The authors argue that the United States must abandon its “free trade” orthodoxy in favor of a robust industrial policy. They contend that decades of laissez-faire economics have led to deindustrialization, a massive trade deficit, and a dangerous dependence on foreign supply chains.

The book provides a rigorous intellectual framework for ideas that were once considered fringe but are now central to the bipartisan “New Washington Consensus.” While the book focuses on the U.S., its “advantageous industries” framework is highly relevant to large emerging markets such as India, Brazil, and Indonesia. These nations, like the United States, have lost relevance in manufacturing and must respond to the onslaught of Chinese exports.

To reverse this decline, the authors propose a Three-Pillar Framework:

  • Strategic Innovation Support: Government must fund the entire lifecycle of “advantageous industries”—sectors with high growth potential and technological “path dependence”—to bridge the “valley of death” between invention and commercial manufacturing.

  • Protection Against Subsidized Competition: Implementing tariffs and anti-dumping measures to shield domestic “mid-tech” and high-tech sectors from foreign subsidies.

  • Competitive Currency: Managing the U.S. dollar (via a “market access charge”) to regulate capital inflows and avoid overvaluation, which currently acts as an implicit tax on American exports.

The authors anchor their argument in American history—citing Alexander Hamilton and the development of the internet—to prove that government intervention is a traditional, rather than radical, engine of prosperity. While they draw inspiration from the success of Japan, Taiwan, Korea, and China, they argue that a “copy-paste” approach would fail due to the unique political, legal, and economic structure of the U.S. Therefore, unlike the “East Asia Development Model,” they advocate for a market-based approach focused on frontier industries necessary for resilience and autonomy. Furthermore, the framework aims to foster quality, middle-class jobs and rejects the wage repression characteristic of East Asia.

The Political Obstacle

The most formidable obstacle to implementing a coherent reindustrialization strategy for the U.S., as for many other countries, is the lack of sustainable political support. In the brief period that industrial policy has been back in vogue, we have seen the plans of the Biden administration largely dismantled and replaced by erratic policies that lack legislative support and fail to provide the long-term clarity needed to secure investments.

In Brazil, a long history of “stop-and-go” policies has discredited industrial policy. Successive administrations are prone to abandoning prior commitments, making investment planning impossible. Neither of the two major political forces prioritizes industrial policy: the focus of Lula’s leftist Workers’ Party (PT) is on expanding welfare distribution, while the Bolsonaro clan favors a naïve free-market path similar to that followed by Javier Milei in Argentina. Moreover, Brazil suffers from a double dose of chronic “Dutch Disease,” where unstable trade and capital flows lead to high currency volatility and boom-to-bust credit cycles. Since 1980, Brazil has undergone an extreme process of deindustrialization, reducing the lobbying power of industry relative to the financial, service, and agro-industrial sectors.

Indonesia faces similar complications; it has lost relevance in industrial exports and remains stuck in a middle-income trap. Current policy efforts are aimed at adding value to commodity resources (bauxite, copper, tin, and palm oil), but these investments are capital-intensive and do not provide significant employment.

The Indian Exception

Fortunately, we can look to India with much more optimism. India did not benefit from the export boom of neoglobalism, but unlike Brazil, its economy still prospered. India has remained a relatively closed economy with a politically powerful industrial sector. Decades of policy reforms aimed at unshackling the economy and liberating private initiative have triggered high growth. Importantly, these reforms are broadly supported by the political class and the influential “national champion” family business groups.

India’s current industrial policy is best understood as a transition from defensive import substitution toward a proactive, resilience-based manufacturing strategy. Facing the “triple threat” of Chinese competition, volatile U.S. tariff regimes, and a fraying international trading system, New Delhi has recalibrated its Atmanirbhar Bharat (Self-Reliant India) framework.

India’s Strategic Outlines:

  1. The Pivot to Ecosystems: The 2026 budget prioritizes “outcome-oriented” support. Instead of just subsidizing production, the government is incentivizing the creation of entire supply chains—raw materials, components, and deep-tech R&D—to anchor manufacturing within India.

  2. Navigating Chinese Competition: India maintains strict scrutiny on Chinese capital in sensitive sectors while using industrial policy to diversify. By building domestic capability in coking coal and rare earth corridors, India aims to “de-risk” its reliance on Chinese inputs.

  3. Adapting to U.S. Tariffs: Following the February 2026 Supreme Court ruling that struck down previous tariff regimes, India is navigating the new 15% flat surcharge under Section 122 by negotiating sector-specific exemptions and aggressively pursuing alternative trade agreements, such as the 2026 India-EU Free Trade Agreement.

  4. Strategic Autonomy: India is engaging in “multi-alignment,” signing FTAs with the EU and UAE while participating in high-tech partnerships to secure access to technology. It is also aligning its industrial standards with global sustainability norms (like the EU’s CBAM) to capture Western capital shifting toward “green” and transparent production.

India is betting that its large domestic market and democratic stability can act as a buffer against global trade volatility, allowing it to build the industrial infrastructure necessary to compete on cost and quality.