Battle for global economic prosperity will largely be won or lost in middle-income countries
By Zion Rufus
The battle for global economic prosperity is increasingly centered on middle-income countries, which hold a pivotal role in shaping the future of the world economy. With a substantial portion of the global population residing in these nations, they stand at a critical juncture, poised to drive economic progress or become a stumbling block that impedes growth.
Middle-income countries like India, Brazil, Nigeria, and Vietnam are diverse, each with its unique economic profile marked by varying degrees of industrialization and technological advancement. Despite their potential, these nations face shared challenges including income inequality, political instability, and the pressing need for sustainable growth strategies.
The significance of middle-income countries in the global economic framework cannot be overstated. They contribute significantly to global GDP, play a central role in international supply chains, and possess burgeoning consumer markets ripe for innovation. Yet, their future remains uncertain, fraught with obstacles ranging from the pressures of globalization to the impacts of climate change.
A recent World Bank report, The World Development Report 2024: The Middle-Income Trap, highlights these challenges, revealing that over 100 middle-income countries face serious barriers to advancing to high-income status. The study finds that as countries grow wealthier, they often encounter a “middle-income trap” around the $8,000 per capita GDP mark—a threshold that has stymied many nations’ attempts to break into the high-income category. The report also revealed that since 1990, only 34 middle-income economies have successfully transitioned to high-income status, with many benefiting from EU integration or resource booms.
A notable portion of these nations benefited from integration into the European Union or discovered significant natural resources like oil. At the end of 2023, 108 countries were classified as middle-income, representing 75% of the global population and generating over 40% of global GDP. However, these countries also account for more than 60% of global carbon emissions and face challenges such as aging populations, rising protectionism, and the urgent need for energy transition.
Indermit Gill, Chief Economist of the World Bank Group, underscores the importance of middle-income countries in the battle for global economic prosperity. “The battle for global economic prosperity will largely be won or lost in middle-income countries,” Gill asserts. He notes that many of these nations rely on outdated strategies, focusing excessively on investment without incorporating new technologies or innovation. A fresh approach is necessary, one that balances investment, infusion of technology, and innovation.
The World Bank report proposes a “3i strategy” for overcoming the middle-income trap. This strategy involves a sequenced and increasingly sophisticated mix of policies. Low-income countries should focus on increasing investment—referred to as the 1i phase. As they progress to lower-middle-income status, they should introduce the 2i phase: a combination of investment and infusion, which involves adopting and spreading foreign technologies. Finally, upper-middle-income countries should advance to the 3i phase, integrating investment, infusion, and innovation. At this stage, countries are expected to push the frontiers of technology rather than merely adopting it.
South Korea exemplifies the successful application of the 3i strategy. In 1960, its per capita income was $1,200. By the end of 2023, it had soared to $33,000. South Korea began with basic investment policies, evolved to adopt foreign technologies in the 1970s, and eventually became a global innovator. Companies like Samsung, which started as a noodle-maker, evolved into global leaders in technology by licensing foreign technologies and fostering domestic innovation.
Other nations have followed similar trajectories. Poland enhanced productivity through technology transfers from Western Europe, while Chile adapted Norwegian salmon farming technologies to local conditions, becoming a top exporter of salmon.
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