At a time when two major economies, USA and the Indiaare making a lot of noise due to their enduring strength, it is worth taking a look at the countries that not long ago were emerging as stars, but are now falling apart. All of them are among the 50 largest economies in the world and, so far this decade, they have suffered a sharp decline in real per capita growth and their share of world GDP.
headed by Germany, Canada, Chili, South Africa and Thailandthese “passes in crisis“They teach us a lesson. Growing up is difficult, maintaining it even harder, so the stars of today are not necessarily the stars of tomorrow.
Let’s take the case of Canada. Widely admired for how he caped the 2008 global financial crisismissed the boat when the world moved on, driven by the large technology companies instead of the raw Materials. The GDP per capita of Canada has fallen 0.4% annually since 2020, the worst rate of the developed economies in the top 50. new investments and the job growth They are being driven mainly by the Government.
Can the strong dollar be tamed?
The action of private sector is largely limited to real-estate market, which contributes little to productivity and prosperity. Many young people cannot afford to shop in one of the real estate markets most expensive in the world. Asked to name a digital success, Canadians cite Shopify, but the online retailer is the only tech name among the country’s 10 largest companies, and its shares are trading at half their 2021 high.
Then there is Chili. Hailed in the 1990s as a model of skillful Asian-style governance in Latin Americahis aura has faded since then. The country is now in the news for the political struggles around its Constitution. The anemic tax collection has destroyed the public servicestriggering violent street protests. The bureaucracy has been extended: the time needed to approve new investments has doubled to almost 20 months, scaring away investors.
As a result, manufacturing industries remain small compared to those in other emerging countries, including neighboring Argentina. The mining productsAs the coppercontinue to represent the majority of its exports and multi-billion dollar wealth, making it Chili looks more like a outdated raw materials economy than a star from Asia.
No developed economy has experienced a more spectacular worsening than Germany. The growth of its per capita income has fallen from 1.6% in the last decade to less than zero in recent years. During the pandemic, Germany seemed flourishing and flexible, ready to excel in the post-covid world. Now she seems weakened by her strong dependence on exports to China and the Russian energy imports. Investment has contributed nothing to growth in recent years, and industrial productivity It is declining at a scandalous annual rate of 5%. Suddenly, the future of the Mittelstand – the network of manufacturers that has long been the engine of German growth – seems uncertain.
South Africafor its part, in 2010 joined the acronym of large, rapidly growing emerging markets led by Brazil, Russia, India and Chinawhen BRIC became Brics. South AfricaAfrica’s largest, resource-rich economy was boosted by a commodities boom that then collapsed, exposing the country’s many failings.
He African National Congress (CNA) has been in power for 30 years and yet presides over the same set of failures: a youth unemployment greater than 50%, a scandalous proportion of the population that receives social care, scarce investments and continuous electricity cuts. Although voters could throw out the ANC next month, the unrest seems too deep to end soon. He IMF foresee a negative per capita GDP growth in the next five years.
Interview with Joseph Stiglitz: libertarians, Argentine debt and a warning about market inefficiency
Lastly, Thailand. Leader of the ‘Asian tigers’ before debts tripped them up in the 1998 crisis, he is now the last in line, the only former tiger to have seen its per capita GDP decline this decade. Has one of the highest inequality indexes in the world, with 79% of the poor living in rural areas. A constant political battle between the rural poor and Bangkok’s elite focuses public debate on how to distribute – not expand – the economic pie. Despite efforts to turn its location on global trade routes into a manufacturing hub, productivity growth is stagnating and Thailand is losing ground to manufacturing rivals such as Vietnam.
The conclusion is not that smart countries have become stupid. It is that there is hidden pitfalls on the path of development that can affect countries of all income levels, from middle to rich. A basic mistake, and one in which any country can find itself stuck, until it finds the leadership and vision to chart a way out. For today’s stars, the message is a warning: Don’t take growth for granted.
