Chennai: The crisis has created many obstacles to growth, but also some opportunities. After 2000, globalisation and surging commodity prices astronomically boosted economic growth among nations with emerging economies. Over the next decade their share of the global economy nearly doubled, growing to 35 per cent. By 2007, 107 of the 110 developing economies featured in the Penn World Table were catching up to the United States in average income, helping millions to escape poverty. The celebratory mood was captured in a popular phrase: “The rise of the rest.”

Then came the crisis of 2008. Trade and capital flows plunged and commodity prices tanked, while slowing global population growth started to shrink work forces. Instead of rising again, developing economies saw their share of the global economy stagnate in the 2010s. Half the countries in the Penn World Table fell behind the United States in average income. Recently hyped stars like Brazil and Russia are growing slower than the U.S. economy is. With the exception of China, “the rest” have fallen off the radar of the global media and financial markets.

This would be more disheartening if it weren’t normal. In most decades after World War II, developed and emerging economies grew at a similar pace. Since nations with emerging economies tended to have populations that were growing faster, their per capita income was in fact often falling behind. These nations might leap forward for a decade or two, and possibly rise up an income class, only to stumble into crisis and find themselves back where they started.

Of 195 economies tracked by the International Monetary Fund, only 39 are “advanced,” and most of those were already advanced by 1945. The few that rose out of poverty and into the developed class are celebrated as “miracles,” such as Japan, South Korea and Taiwan. Their secret: export manufacturing, which by bringing in revenue from all over the world can sustain growth rates that would be impossible in a domestic market alone.

Today, however, manufacturing and exports are shrinking as forces in the global economy, so it can be hard to imagine what would power the next growth miracles. This explains the silence that engulfs emerging economies. But in economies, as in nature, nothing is created, nothing is destroyed — everything is transformed. And the transformations of the pandemic are already providing energising possibilities for at least a few emerging economies. Those transformations include an accelerating digital revolution, economic reform and a revival of commodity prices.

The pandemic is accelerating the adoption of digital technology, which has a particularly strong effect on immature economies. Digital technology is unlikely to generate double-digit growth because its impact is largely limited to domestic economies, with no added boost from exports. But it can simultaneously and sustainably transform domestic emerging economies.

The US 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 labour laws and rules that have protected farmers from market forces for decades. 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.

Sharma is the chief global strategist at Morgan Stanley Investment Management. NYT©2020