Efforts of propagating waves of economic growth across the world economy have thus far been constrained to a limited number of channels and paradigms. In particular, the unipolar setting of the past several decades made the global economy hyper-dependent on the US Fed, with EM being highly susceptible to swings in US monetary policy that were often accompanied by volatility and crises across developing countries. Another paradigm/channel was the G20 that performed several rounds of coordinated stimuli seeking to support growth in the wake of the 2008 financial crisis and the COVID pandemic. Bretton Woods institutions such as the IMF and the World Bank could also be viewed as key channels of advancing growth across emerging markets via the provision of resources supplied by the largest shareholders and subject to stringent conditionality.
The resulting pattern was that the waves of breakout nations – economies that exhibited high and sustainable growth rates – were concentrated in those groups of economies that benefited from the benevolence and preferential treatment of the great powers. Since the second half of the past century US preferential treatment (including via preferential access to the large US consumer market) with respect to emerging economies in Asia and Latin America was one of the important determinants of economic performance. Examples such as the Asian tigers of Taiwan and Singapore in Southeast Asia or Chile and Panama in Latin America in the second half of the 20th century may have shown the workings of such geopolitical insurance / ”external anchors” providing a more stable trajectory for long-term growth to unfold. The flip side of this pattern was that such insurance was fraught with geopolitical conditionality and the significant differentials in external conditions for economic modernization faced by other developing economies.
But if the world economy were to be relieved of the tethers of geopolitical conditionality and if the patterns of promoting new breakout economies/success stories in modernization were to be driven largely by economic considerations of global/regional welfare maximization, then the set of available options for engineering new “growth miracles” would become notably wider. In a multipolar setting where international institutions and bilateral economic ties are not as driven by the prescriptions/preferences of one or few major powers, various segments and regions of the world economy may pursue their own algorithms for spreading economic success. Below we explore some of the potential scenarios of the pro-active strategies to seed growth across emerging markets in an increasingly multipolar setting, with all of the three scenarios involving to some degree regional considerations/frameworks:
- Seeding growth in waves across EM: this track would involve identifying several waves of breakouts in the main regions of the Global South – Latin America, Africa, Asia. Each consecutive wave of breakouts would come from the same regions, thus building on the achievements of the preceding wave of breakouts.
1st wave: Bolivia in Latin America, Ethiopia in Africa, Uzbekistan in Central Asia, Nepal in South Asia
2nd wave: Paraguay in Latin America, Uganda in Africa, Tajikistan in Central Asia, Bhutan in South Asia
3rd wave: Colombia in Latin America, Rwanda in Africa, Kyrgyzstan in Central Asia, Bangladesh in South Asia
The underlying principle around the waves formation would be to start with the relatively more disadvantaged economies that are landlocked, that are large in terms of territorial size and population and relatively low in the ranking of GDP per capita. The first waves of growth stimuli would thus focus on those land-locked economies whose greater regional integration and growth would deliver the strongest growth and development impulses to the rest of the region. With some of the first wave candidates represented by LLDC (Landlocked Developing Countries) and LDC (Least Developed Countries) – economies with relatively low GDP per capita levels – there would be more scope for convergence and catch-up growth to unfold. In this respect, prioritizing the support for large, landlocked economies, to forge ahead with integration into global markets through the reduction of logistical barriers would benefit the broader region through creating new connectivity tracks and greater employment opportunities. The latter is particularly important in those landlocked regions of Central Asia and South Asia as well as Africa, where demographics creates pressures to deliver greater opportunities for employment of the growing young population.
- Growth via regional institutions: rather than selecting the successive waves of regional breakout economies, an alternative option is simply to provide support to the respective regional organizations – regional integration arrangements and their development institutions such as regional development banks and regional financing arrangements. These resources could then be allocated by the respective institutions across the region based on the potential regional integration effects and economic dividends. Such an approach has already been tested by the BRICS New Development Bank that worked closely with the regional development banks, in which BRICS core economies were members. One of such examples was the cooperation between the BRICS NDB and the Eurasian Development Bank in financing sustainable energy projects. This regional track may become progressively important as the number of mature regional formations that are fully equipped with regional development institutions is likely to grow in a multipolar setting.
- Growth poles: instead of ambitiously seeking to advance the development of whole national economies, a more measured approach that would arguably involve less resources and risks/fragilities, would focus on advancing regions/cities with high development potential to become the growth poles for the wider national economy. Selecting promising regions/municipalities/financial centers that may become engines of growth across the wider regional integration arrangements (RIAs) will need to complemented by strategies and resources to spread the growth impulses from such poles, otherwise the risks of regional inequality and imbalances would be a concern.
In the end, the way growth is to be propagated throughout the global economy from the growth poles and largest economies to the rest of the world needs a major re-think. The past models and constructs of how growth was to be disseminated did not attain the degree of inclusivity and penetration that would provide a lasting and qualitative effect to global growth dynamics. In a multipolar setting, the array of possible scenarios of how growth impulses are disseminated across the global economy is likely to expand, with additional/alternative tracks for supporting growth in EM emerging via such frameworks as BRICS+. As the world economy transitions to a more diverse, multipolar setup, the rise of new breakouts and the propagation of growth across the global economy is likely to be driven increasingly by regional platforms, regional integration arrangements and regional development institutions. If the efforts of global institutions such as the IMF, World Bank and the WTO together with the new alternative platforms such as BRICS+/NDB are supported and buttressed by a growing role of regional development institutions, the resulting benefits would include greater ownership and accuracy of modernization policies as well as wider possibilities to scale growth impulses via regional knowledge and resources.
Yaroslav Lissovolik, Founder, BRICS+ Analytics
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