The Illusion of 'Emerging': Why So Many Developing Economies Are Actually Declining

“A fragile world economy built on unstable foundations.”

I live in a country where we were proud to call ourselves an "emerging economy." But every year, the story stayed the same: the national debt to international groups like the IMF and the World Bank kept going up. This shocking difference between the shiny talk of progress and the harsh truth of rising debt has always made me think deeply.

A few years ago, I wrote an article about how quickly Argentina's economy was falling apart. As I wrote, a painful pattern started to take shape. It was clear that the problems that "Third World" or "Developing" countries face are not just one-time events, but signs of a bigger, deeper crisis.

The Global Economic Fault Line

In many parts of the world, people agree that most developing countries are actually economies that are getting worse. Regions like Africa, South Asia, the Far East, and South America are all going through very similar problems.

The structure of international trade policies and the control that international organizations and powerful, dominant countries have over important resources seem to be the main things that are causing this global trend. Countries often have a hard time making their economies strong and diverse. This is why the fall of a once-developed country like Argentina is such a strong and scary example for other countries that are still developing.

Argentina: A Fall from Grace—The Sad Story of a Developed Nation's Decline

Argentina's economy has a sad and unique history. The country went from being developed to developing. It is a clear warning about how easy it is for things to go wrong when institutions are weak.

From Prosperity to Peril: The Rise and Fall

In the late 1800s and early 1900s, Argentina's story was one of progress that couldn't be stopped.

  • A Global Economic Powerhouse: Argentina became a global economic powerhouse after gaining independence in 1816 and passing the Constitution in 1853. Strong institutions helped the economy grow quickly. By 1913, people thought Argentina was one of the ten richest countries in the world. The country attracted a lot of immigrants because its GDP growth rate was one of the fastest in the world.

  • The Engine of Growth (1880–1930): There were three important things that made this golden age possible:

    1. Foreign Funding: Most of it came from Britain, which put a lot of money into public borrowings, railroads, and land mortgages.

    2. Agricultural Exports: The rise in grain production, which came after a time when sheep farming was the main source of income, made it a major exporter of primary goods.

    3. Open Markets: Big exports to global markets helped the economy keep growing.

  • The Turning Point: In 1950, Argentina was still the largest economy in Latin America, accounting for almost a quarter of the continent's GDP. But in the middle of the 20th century, this path came to an end. Argentina's income per person is only 43% of the average of 16 other countries today, down from 92% in 1930. The decline was unavoidable because of structural problems.

The Causes of the Regressive Downfall

There wasn't just one event that caused the big drop; it was a bad mix of internal and external factors:

1. Unstable Politics and Military Action

The main reason for such a huge drop is political instability. Argentina had military controls again and again after World War I, in 1930, 1943, 1955, 1962, and 1976. These actions made it impossible for elected governments to set long-term economic policies. Because of the instability,

  • Less Foreign Investment: Investors from the UK and other parts of Europe lost interest, which stopped the flow of money that had helped the country grow in the first place.

  • Domestic Crises: The country had domestic terrorism in the 1960s and 1970s, which made the law and order situation even worse and kept it from opening up to global markets.

2. Lack of a Strong School System

The US, Germany, and Japan put a lot of money into their people, but Argentina did not. Landowners, who had a lot of power, wanted cheap labor and didn't want people to invest in good schools.

  • Argentina had a high rate of primary education but one of the lowest rates of secondary education. Because the country didn't give its people modern skills, it couldn't create competitive industries or make good use of new technologies.

  • Technology innovation, which is a necessary part of modern global growth, came to a halt because it needs both educated workers and money to invest, and neither was available.

3. Too Much Dependence and Shocks from Outside

Argentina's heavy reliance on Britain as its main trading partner and source of capital didn't work out. Britain's own problems after World War I caused a major economic crisis in Argentina. Commonwealth countries also had problems when their preferred markets changed.

A Cycle of Loans and Bailouts

The damage to the economy has been huge. Argentina has had to ask the IMF for money 22 times in its history, the last time being in 2018. The country's recent attempt to postpone the $44 billion loan repayment shows how long its debt crisis has been going on. The current government is focused on getting foreign money to help with industrialization and boosting exports, but this cycle of debt keeps making it hard for the economy to grow.

What to Do After the Global Crisis of Falling Economies

Because of globalization, many poor countries are having a lot of trouble because of structural inequalities. The case of Argentina is a macro-level expression of a global problem. To overcome this crisis, a multi-faceted approach involving both domestic reform and a shift in global policy is necessary.

Summary of Key Reforms to Overcome the Global Crisis

The necessary solutions fall into two main categories: strengthening domestic foundations and reforming the global economic system.

I. Domestic and Institutional Reforms: The core goal is to strengthen the nation from within. This starts with building Strong, Resilient Institutions, which means having strong and separate political, legal, and financial systems that make sure policies are made correctly and that corruption is kept to a minimum. Furthermore, governments must Invest in People and Technology, spending a lot of money on good secondary and tertiary education and investing in new technologies and businesses to create a skilled workforce. Finally, economies must pursue Economic Diversification by strategically supporting manufacturing and high-value services to move away from relying on a few primary exports.

II. Global Policy and Trade Reforms: The international system must be rebalanced. This requires changing International Trade Policies to provide fair access and competition for developing economies, especially by helping "infant industries" grow. To tackle the debt crisis, Debt Restructuring and Relief plans must be flexible and bold, including structural changes related to debt relief, providing more money in the budget for social and infrastructure needs, and arranging timely and coordinated debt write-offs or reschedulings. Lastly, Financial and Technical Assistance should focus on building social resilience (safety nets, job systems). This will turn bad things that happen to the economy into chances to grow and change.

For the "Emerging Economy" front to turn into real, long-term growth, everyone needs to be ready to deal with the harsh realities of the global economy and make long-term, disciplined changes.


 

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