BRIC wall

THE economic crisis may have been debilitating for the rich world but for emerging markets it has been closer to a triumph. In 2010 China overtook a limping Japan as the world’s second-largest economy. It looks sets to catch America within a decade or two. India and Brazil are growing rapidly. The past few years have reinforced the suspicion of many that the story of the century will be the inexorable rise of emerging economies. If projections of future growth look rosy for emerging markets, however, history counsels caution. The post-war period is rich in examples of blistering catch-up growth. But at some point growth starts to disappoint. Gaining ground on the leaders is far easier than overtaking them.
Rapid growth is initially easy because the leader has already trodden a clear path. Developing countries can borrow existing technologies from countries that have already become rich. Advanced economies may be stuck with obsolete infrastructure; laggards can skip right to the shiniest and best. Labor productivity soars as poor economies shift workers from agriculture to a growing manufacturing sector. And rapid income growth among young workers boosts savings and fuels investment.
But the more an emerging economy resembles the leaders, the harder it is to sustain the pace. As the stock of borrowable ideas runs low, the developing economy must begin innovating for itself. The supply of cheap agricultural labor dries up and a rising number of workers take jobs in the service sector, where productivity improvements are more difficult to achieve. The moment of convergence with the leaders, which once seemed within easy reach, retreats into the future. Growth rates may slow, as they did in the case of western Europe and the Asian tigers, or they may falter, as in Latin America in the 1990s.

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