The Rise of ‘the Rest’?

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The US-led global economy has had mixed success in seeing the benefits of technological change spread to less developed economies since World War II. Significant parts of Asia have taken off and, in some cases, caught up with advanced economies. On the other hand, sub-Saharan Africa only recently surpassed its previous per capita GDP peak of the 1970s; Latin America’s trajectory has also been meagre: It underwent two decades of low growth until the 2000s; and most of the 15 successor states of the USSR have performed exceptionally poorly, except for the Baltic states and certain Eastern European countries formerly part of the Soviet Bloc.

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Over the past few decades, emerging markets have thus seen their fortunes diverge further from Western economies. Moreover, the commodity cycle that helped propel emerging markets since about 2000 has come to an end.

Nevertheless, optimism surrounding emerging markets is justified for a number of reasons:

• Taking a longer view, from 1952 to 2008, 22 non-Western countries saw their GDP per capita grow at more than double the US rate (‘rapid catch-up’), while 53 non-Western countries grew faster than the US (‘catch-up’). Only nine countries in the ‘rapid’ group were from Asia, though many are small economies.


• Alongside a variety of non-GDP indicators such as life expectancy, education, and health interventions, emerging markets are slowly converging with advanced economies.


• With the rise of China, India, and emerging Asia, the majority of people worldwide are catching up with the West rather than falling behind it, leading to an ‘emerging global middle class’.


• New technologies and ideas that facilitate future catch-up will – despite efforts to make them excludable – spread, be assimilated, bought, backward-engineered, and learnt online.


• China has become an additional economic centre of gravity for the global economy. More than anything, this is shifting the global economic geography towards the developing world and challenging Pax Americana, which has until now underwritten the spread of free market imperatives and growing global integration. This relative shift in economic and financial power has already provided immense benefits to emerging markets, but contains significant risks if growing inter-state rivalry increases global instability.