Flag of Brazil hanging on terrace.

Will Technology Kill Convergence?

Hailed in the wake of the 2008 financial crisis as the new engines of the world economy, the emerging economies are now acting as a drag on growing growth, causing many to argue that their era of rapid expansion – and their quest to achieve convergence with advanced-country income levels – is over. Are the doomsayers right?

WASHINGTON, DC – At last week’s annual meetings of the World Bank and the International Monetary Fund in Lima, Peru, one topic that dominated discussions was the slowdown in emerging-economy growth. Hailed in the wake of the 2008 financial crisis as the new engines of the world economy, the emerging economies are now acting as a drag on global growth, and many argue that their era of rapid expansion – and their quest to achieve convergence with advanced-country income levels – is over. Are the doomsayers right?

There is certainly reason for concern – beginning in China. After decades of nearly double-digit growth, China appears to be experiencing a marked slowdown – one that some argue is actually worse than official statistics indicate.

As China’s growth slows, so does its demand for oil and commodities, with severe effects for other emerging economies that depend on commodity exports. Moreover, the benefits of lower commodity prices do not seem to have materialized among net importers, except perhaps India; if they have, they have been far from adequate to offset other growth-damaging forces.

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