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More than 100 countries have been stuck in the so-called 'middle-income trap' for years, unable to advance to a higher level of per capita income. According to a World Bank report published this Thursday, by the end of 2023, 108 developing economies were trapped in this economic limbo.
This trap is defined as a threshold where per capita GDP reaches a level close to 10% of that of the U.S. (approximately $8,000 annually), but then stagnates. These countries, which include giants like China, India, and Brazil, represent 75% of the global population, 40% of economic activity, and 60% of carbon emissions. Therefore, the World Bank considers them essential for global prosperity and proposes a roadmap to help them reach high-income status.
The concept of the 'middle-income trap' was developed nearly 20 years ago by World Bank economists, who observed that the per capita GDP of developing countries tends to stagnate at a level around 10% of that of the U.S. According to the institution, countries with a per capita income between $1,136 and $13,845 are classified as middle-income.
Since 1990, only 34 economies have managed to escape this trap and become high-income countries. Over the past decades, the average income of these middle-income countries has stagnated, not surpassing 10% of U.S. income. In Sub-Saharan Africa, for example, income levels have not changed over the past decade. Economic growth in these countries has slowed and is expected to grow by only 4% on average in the 2020s, compared to 5% in the 2010s.
Despite the challenges, some countries have managed to advance. South Korea, for example, saw its per capita income rise from $1,200 in 1960 to $33,000 in 2023, thanks to investments and industrial policies that boosted technology and innovation. China, India, and Vietnam have specific goals to achieve high-income levels in the coming decades.
The World Bank's 2024 report proposes a strategy for these countries to escape the middle-income trap. The strategy includes a dual transition: first, fostering investment and the adoption of external technologies, and then advancing towards domestic innovation. This strategy is based on Joseph Schumpeter's theory of economic growth, which highlights the importance of wealth creation and destruction for economic growth.
The success of this strategy depends on how societies manage the creation, preservation, and destruction of wealth, as well as their ability to adapt to new technologies and overcome obstacles such as climate change.
Source: elpais.com/economia/
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