Developing countries – relegated to the sidelines of the West-led postwar expansion – have emerged as the saving grace of the global economy against a backdrop of calls for a new economic model that can ease the ravages of globalization and address the lack of confidence in market-based systems.
Indeed, supporting economic growth in developing countries in a way that expands domestic productivity and stimulates global demand has been a core message at the annual meetings of the World Bank and International Monetary Fund (IMF) underway in Tokyo this week.
Financial leaders and influential policymakers have also identified the importance of investment in infrastructure and technology transfer in order to boost sustainable growth in developing economies.
“The envisaged global superhighway has not realized enough growth in the world,” said IMF Managing Director Christine Lagarde, pointing out that economic expansion is currently being recorded mostly in developing countries.
Speaking at a discussion on globalization here, Lagarde says the key economic challenge today is the trend of decreasing job opportunities for youth, suggesting that nations can help each other in meeting these challenges.
“I fear an intergenerational conflict if our financial model leaves increasing debt for the younger generation,” she warned.
Western economies in particular have been hit with massive unemployment among the younger generation. Unemployment rates are as high as 50 percent in countries such as Spain and Greece, both dealing with severe austerity plans imposed by global financial lending institutions.
But Asia, by contrast, has been recording expansion. China, Asia’s growth engine, has shown an average annual 10 percent GDP growth over the past decade and is now the world’s second largest economy.