From the steam engine to cars, the economic effect of tech revolutions has tended to gain momentum over time and peak decades after the original invention. The digital revolution is young; its biggest influence on the growth of emerging economies is most likely still to come.
Another major development is economic reform. One of the biggest drags on the long-term prospects of these nations is that they tend to get stuck in a cycle of success and failure, reforming only when forced to in a crisis, frittering away the gains during the ensuing boom, then falling back into crisis. A crisis as big as the pandemic could be relied on to force major reforms — and it has.
The United States and other nations with developed economies are ramping up spending to ease the financial pain of the pandemic, but there will be negative consequences for growth in the future. Lacking the means to spend, poorer countries are pushing reform that, while often unpopular, should boost productivity and promote growth. India is relaxing labor laws and rules that have protected farmers from market forces for decades. Indonesia is cutting taxes and red tape to generate investment and jobs. Brazil is pushing ahead with plans to downsize its unaffordably generous pension system. Saudi Arabia is overhauling its immigration rules to open labor market competition. Similar campaigns are underway in Egypt, the United Arab Emirates and other nations.
Unfortunately, many emerging economies depend on exports of oil, metals, farm products and other commodities, so their prospects shift with the prices of those commodities. Long booms and busts have left commodity prices essentially flat in inflation-adjusted terms since records began in 1850. That explains why so many economies are stuck in the developing stage. The per capita income of Brazil, a major commodity exporter, is no higher today, relative to the United States, than it was in 1850. Most leading oil exporters are no richer today, relative to Western nations, than in the year they discovered oil.
Still, in decades when commodity prices rise, the number of developing economies catching up to their developed counterparts spikes. Now, after a down decade, which forced producers to cut back on excess supply, market forces point to a revival for commodity prices in the 2020s. That in turn should lift the fortunes of emerging markets like Brazil, Russia and Saudi Arabia, at least until the commodity cycle turns again.
It’s also worth noting that although the path to prosperity though manufacturing is narrowing, it hasn’t closed. In the past, manufacturing accounted for more than 15 percent of G.D.P. in export powerhouses. Today the economies in this class include Vietnam, Bangladesh, Poland and the Czech Republic. They are among the big winners as companies seeking lower wages and shorter supply lines move factories out of China.
The transformative effect of manufacturing is visible in a country like Poland, where multinational corporations are now making cars, light fixtures and other goods. Before the pandemic, a quarter century of unbroken growth had increased Polish incomes nearly tenfold to almost $16,000 — on the cusp of the advanced economic class. A similar transformation is underway in Vietnam, which is investing not only in new factories, roads and ports, but also in programs to eliminate poverty.
If only a few nations stand to gain from export manufacturing, many more have a chance to thrive on the back of economic reform, a possible revival in commodity prices or the accelerating digital revolution. These growth engines won’t bring back the “rise of the rest,” which lifted virtually every developing economy in the 2000s. But they will be enough to power a few growth stars. In the 2020s, some of the rest will likely rise again.
Ruchir Sharma is the chief global strategist at Morgan Stanley Investment Management, the author, most recently, of “The Ten Rules of Successful Nations” and a contributing opinion writer. This essay reflects his opinions alone.
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