Not quite emerging countries

As a student working for a degree in economics in a large "emerging" country in the early 1990's, I can recall the excitement of seeing wide-ranging liberal reforms being implemented all over the developing world. After surviving the dreary 1980's (aka "The Lost Decade"), it seemed that we were finally starting the dash for growth that would set us on the path for enduring prosperity.

Well, so much for that. In the end, the previous decade ended with a whimper, with crises laying low the nations, such as Argentina and Mexico, that were the toast of the international finance community just a few years back.

The World Bank has just put out a report on economic growth in the 1990's that focusses on the emerging world. I haven't read it in full, but the bits I've looked at are pretty good. In the end, it shows that we still have a lot to learn about what it takes for a country to grow on a sustained basis. It states that in that decade there were 5 major disappointments:

1. The length, depth, and variance across countries of the output loss in the transition from planned to market economies in the former Soviet Union (FSU) and Eastern European countries.

2. The severity and intensity of the international and domestic financial crises that rolled throughEast Asia

3. Argentina’s financial and economic implosion after the collapse of its currency convertibility regime

4. The weakness of the response of growth to reform, especially in Latin America, and the unpopularity of many of the reforms.

5. The continued stagnation in Sub-Saharan Africa, the paucity of success cases there, and the apparent wilting of optimism around the“African Renaissance.”

On the other side of the ledger, the WB states there were 3 pleasant surprises:

1. Bright spots of sustained rapid growth, especially in China, India, and Vietnam, throughout the decade

2. The strong progress in noneconomic indicators of well-being in spite of low growth in some cases.

3. The resilience of the world economy to stresses

One can quibble with the list, but its a fair summary. Needless to say, the main disappointment was that most nations didn't grow as much as initially forecast despite implementing market-friendly reforms. This shows just how hard the business of development actually is.