Emerging Market and Developing Economies

The emerging market and developing economies represent a broad range of economies that implement market-oriented reforms to promote economic growth and development. The term emerging market and developing economies is often used interchangeably with emerging market and developing countries. Under the World Bank's classification system, there were 179 emerging market and developing economies and 35 advanced economies operating in the global economy in 2012. Emerging market and developing economies included all of the low-income (36 economies), lower-middle-income (48), and upper-middle economies (55), plus 40 of the 75 high-income economies.^[1]

The IMF classification of economies identified 153 emerging market and developing economies as well as 35 advanced economies in 2012. A regional grouping of these economies is shown in Table 13.3. Under the IMF classification the emerging market and developing economies accounted for 85 percent of the world's population, half of global GDP, and nearly 40 percent of global exports. Developing Asia held a leading position among the six regional subgroupings, accounting for about half of the world's total population and a quarter of global GDP. China and India were the dominant producers in Developing Asia.^[2]

Strategies for economic development differ widely. Countries often create a formal development plan to guide the country's path toward development. A development plan sets targets, or goals, for savings and investment, production, wages and income, international trade, and macroeconomic performance in the realms of price stability, employment, and economic growth. Over time some development plans have employed a command model, which centralized decision making in the hands of government officials. The authoritarian state-planning apparatus of the former Soviet Union from the late 1920s to the early 1990s illustrates this type of planning. In more recent decades most development plans have emphasized the market model, which values private property rights, profit incentives, economic freedoms, and global connectivity. The planning process in the market model also supports inclusion by various stakeholders such as businesses, organized labor, and segments of civil society.

Many emerging market and developing economies have taken steps toward economic development. One significant measure of their progress is the success of many nations in meeting Millennium Development Goal (MDG) targets. In 2000 the United Nations General Assembly adopted the United Nations Millennium Declaration, which pledged to reduce global poverty and improve people's quality of life. The accompanying MDGs outlined an agenda for global development, with specific targets to achieve by 2015. Heading the eight MDGs was poverty reduction, which soon became the centerpiece of the global development agenda. The United Nations reported that the number of people living below the international poverty line of $1.25 per day fell by about 700 million people from 1990 to 2010. This means that the UN met its MDG target of halving extreme poverty—a target that was achieved five years ahead of schedule.^[3] In addition, between 1990 and 2010 more than 2 billion people in the developing world gained access to improved drinking water, and millions more were saved from diseases such as malaria and tuberculosis. Significant progress was also made in achieving other MDG targets in the realms of public education, gender equity, child mortality, maternal health, environmental protection, and the establishment of global partnerships for development.^[4]

Another measure of progress is the growing share of global output and international trade controlled by emerging market and developing economies. For example, in 2001 these countries produced just 43.8 percent of global output. By 2012 this percentage increased to 49.9 percent. During these same years world output increased from $46.7 trillion to $83.1 trillion—a $36.4 trillion increase (PPP). In other words, the emerging market and developing countries commanded a greater piece of global output from a significantly larger global pie. Similarly, the emerging market and developing economies' share of international trade increased dramatically from 2001 to 2012, rising from just 25 percent of global exports in 2001 to 38.8 percent of exports a decade later.^[5]

The progress of many emerging market and developing economies is not shared by all countries, however. The least developed countries, for example, have lagged behind. The least developed countries (LDCs) are the 49 poorest and most vulnerable countries in the global economy. The United Nations (UN) describes LDCs as “structurally disadvantaged” and the “most likely to experience difficulties in their efforts to come out of poverty.”^[6] The United Nations identifies an LDC by its low GNI per capita, weak human assets, and high vulnerability to economic shocks such as natural disasters or disruptions in trade. Of the 49 LDCs that existed in 2012, most were located in Africa (34), followed by Asia (9), the Pacific (5), and the Caribbean (1).^[7]

Generally speaking, the low-income and middle-income developing economies also lag behind the advanced economies in the structure of national output. In 2010 many lowand middle-income countries continued to rely heavily on traditional agriculture and

Traditional subsistence agriculture in Mozambique, 2002. (Eric Miller/The World Bank)

industry, rather than on the production of services, as shown in Figure 13.2.^[8] Recall from Figure 13.1 that the high productivity in the advanced economies enabled a shift away from agriculture and industry in favor of services.

• [1] World Bank, “Country and Lending Groups,”
• [2] IMF, “Table A,” World Economic Report: April 2013, 139.
• [3] United Nations, The Millennium Development Goals Report 2013 (New York: UN, 2013), 2013, 4–5.
• [4] Ibid.
• [5] IMF, ”Table A,” “Table A1: Summary of World Output,” World Economic Outlook: April 2013, 139, 149; IMF, “Table A,” “Table 1,” World Economic Outlook: April 2001 (Washington, DC: IMF, 2002), 158, 167.
• [6] United Nations Conference on Trade and Development (UNCTAD), “UNCTAD Acknowledges Admission of South Sudan as Forty-Ninth LDC,” December 20, 2012
• [7] Ibid.; UNCTAD, The Least Developed Countries Report: 2012 (New York: UN, 2012), Introduction.
• [8] World Bank, “Table 4.2: Structure of Output,” World Development Indicators: 2012, 218-220.