Adapt or Die

The major emerging economies have succeeded by focusing not only on macro and monetary stability, but also on adaptation, guided by a forward-looking (though inherently imperfect) assessment of coming micro and macro structural shifts and the measures needed to support them. Can the major developed countries do the same?

MILAN – In rapidly growing emerging markets, a combination of internal economic forces, supportive policies, and the shifting nature of the global economy drive high-speed and far-reaching change. The transformation of economic structures occurs so quickly that it is virtually impossible not to notice – though the complexity of the change is, at times, bewildering.

In this fluid environment, mistakes are frequently made. Arguably the most damaging is to stick to a successful growth strategy (a combination of comparative advantage and supportive policies) for too long. In the economy’s tradable sector, comparative advantage always shifts, causing structural change and creative destruction. Countries undergoing a “middle-income transition” out of poor-country status frequently try to resist these changes, but doing so causes growth to slow, if not stop altogether.

While the private sector (domestic and external) drives these shifts, government policies and public-sector investment patterns play an essential supporting and complementary role. These need to adapt, too. The policy framework that has proven to serve the major emerging economies best is one that focuses not only on macro and monetary stability, but also on adaptation, guided by a forward-looking (though inherently imperfect) assessment of coming micro and macro structural shifts and the measures needed to support them.

To continue reading, please log in or enter your email address.

To access our archive, please log in or register now and read two articles from our archive every month for free. For unlimited access to our archive, as well as to the unrivaled analysis of PS On Point, subscribe now.

required

By proceeding, you agree to our Terms of Service and Privacy Policy, which describes the personal data we collect and how we use it.

Log in

http://prosyn.org/BlfufQE;

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.