Guest post: the free ride to convergence is over; EMs must boost productivity – beyondbrics - Blogs - FT.com

Guest post: the free ride to convergence is over; EMs must boost productivity – beyondbrics - Blogs - FT.com:



"The year 2010 was a turning point. What we didn’t know at the time – but what new data just released have shown us – was that 2010 was the year when the share of non-OECD countries in the global economy surpassed that of OECD countries, at purchasing power parity. The rate of this shift has been remarkable: just 10 years earlier these countries accounted for 40 per cent of the global economy. The shift is being led by China and India, which together account for almost a quarter of the global economy.



However, there has recently been a slowdown in the rate of growth of emerging economies, including China. At their average growth rates during 2000-2012, several lower middle-income countries such as India, Indonesia and Vietnam, but also countries in the upper middle-income bracket such as Brazil, Colombia, Hungary, Mexico and South Africa, will fail to converge with the average OECD income level by 2050. Their challenge is deepened by the slowdown in China, whose rapid growth in the past has benefited its overseas suppliers, especially natural-resource exporters. The free-ride towards convergence for many developing countries, based on China’s growth, is over.



These trends add to concerns about emerging countries being unable to make the transition to high income levels and better living standards – what some refer to as the ‘middle-income trap’. What we know is that sustained growth slowdowns can be linked with significant slowdowns in productivity growth. Boosting productivity must therefore be at the heart of boosting economic growth in middle-income countries, and is what the OECD Development Centre has been examining in this year’s Perspectives on Global Development report."



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