The anti-growth traps: What stops countries from getting ahead?

Middle-income nations are stuck on the road from rags to riches. According to the World Bank, the status quo is partly to blame.

Transcript

00:00More than 100 countries could hit a brick wall on the path from low-income to high-income

00:05status in the coming decades. That's according to a new report from the World Bank. At the

00:11end of 2023, 108 countries were classified as middle-income. This means they each had

00:17an annual GDP per capita between around US$1,100 to around US$13,800.

00:26The prospects for these middle-income countries is not promising. Over the last 34 years,

00:34only 34 middle-income economies have been able to transition from middle-incomes to

00:40high-incomes. The rest are stuck in a middle-income trap.

00:45According to the World Bank, nations must take a three-pronged approach to escape the

00:50middle-income trap. Step one, focus on domestic investment. Step two, import tech and business

00:57models seen in more advanced economies. After these two steps, countries can then concentrate

01:03on innovation.

01:05Korea provides an incredible example of a country that moved from low-income to middle-income

01:11to high-income in a span of 40 years. And this is a country that gradually increased

01:19investment, but in the 1970s switched quickly to infusion of ideas primarily from Japan

01:26and diffused them in the local economy. And over time, as they reached kind of upper middle-incomes,

01:33they quickly switched to innovation.

01:36One way to escape the income trap is to invest in education and social mobility. This can

01:42upgrade a country's workforce.

01:45While the policies we describe in the report are really important to set the pace of economic

01:51growth, there are also some people who fall through the cracks. We need to make sure that

01:57they are not forgotten and their skills are upgraded and their families are provided support

02:03in the short term.

02:05The World Bank says that nurturing a talented labor force is particularly important in the

02:10current climate. Aging populations, rising debt levels and the climate crisis are all

02:16threatening worldwide growth.