Here is a brief excerpt from an article written by Jonathan Woetzel, Anu Madgavkar, Jeongmin Seong, James Manyika, Kevin Sneader, Oliver Tonby, Andres Cadena, Rajat Gupta, Acha Leke, Hayoung Kim, and Shishir Gupta for the McKinsey Quarterly, published by McKinsey & Company. To read the complete article, check out other resources, learn more about the firm, obtain subscription information, and register to receive email alerts, please click here.
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Some emerging economies have grown much faster and more consistently than others. Underlying these success stories is a pro-growth policy agenda and the standout role of large companies.
Emerging economies have accounted for almost two-thirds of the world’s GDP growth and more than half of new consumption over the past 15 years. Yet economic performance among individual countries varies substantially.
In Outperformers: High-growth emerging economies and the companies that propel them (PDF–3.20MB), the McKinsey Global Institute looks at the long-term track record of 71 developing economies to identify the outperformers—and finds two key factors that help explain their outperformance: a pro-growth policy agenda of productivity, income, and demand that has driven exceptional economic growth, and the underappreciated but nonetheless standout role that large companies have played in driving that growth.
- Eighteen of 71 countries outperformed their peers and global benchmarks.
- A pro-growth agenda of productivity, income, and demand has driven outperformance.
- The role of productive companies is a key characteristic of outperforming economies.
- Changing times spell potential new opportunities for emerging economies.
- The global economy could receive an $11 trillion boost if all emerging economies emulate outperformers.
[Here is the first of five areas on which the co-authors focus.]
Eighteen of 71 countries outperformed their peers and global benchmarks
We analyzed the per capita GDP growth of 71 economies over 50 years, starting in 1965. Of these, we identified 18 as outperformers, about one in four.
Seven economies achieved or exceeded real annual per capita GDP growth of 3.5 percent for the entire 50-year period. This threshold is the average growth rate required by low-income and lower-middle-income economies to achieve upper-middle-income status over a 50-year period, as defined by the World Bank. The seven are China, Hong Kong, Indonesia, Malaysia, Singapore, South Korea, and Thailand.
We also found a second group of 11 more recent, less heralded, and more geographically diverse outperformers. They achieved real average annual per capita GDP growth over the 20 years between 1995 and 2016 of at least 5 percent. The 11 are Azerbaijan, Belarus, Cambodia, Ethiopia, India, Kazakhstan, Laos, Myanmar, Turkmenistan, Uzbekistan, and Vietnam.
These 18 countries not only showed exceptional average performance but also demonstrated consistency by exceeding the benchmark growth rate in at least three-fourths of the 50 and 20 years, respectively (Exhibit 1).
Collectively, these outperformers have been the engine for lifting one billion people out of extreme poverty, defined by the World Bank as living on less than $1.90 per day. Rising prosperity in these countries has not just reduced poverty but has also enabled the emergence of a new wave of middle and affluent classes. Between 1990 and 2013, the number of people living in extreme poverty in the 71 emerging economies fell from 1.84 billion to 766 million. Outperformers accounted for almost 95 percent of that change.
Less than 11 percent of the world’s population now lives in extreme poverty, down from 35 percent in 1990.
At the same time, growing numbers of residents of these countries joined the “consuming class”—that is, people with incomes high enough to become significant consumers of goods and services. In India, for example, the number of consuming-class households rose tenfold in two decades, from 3.4 million in 1995 to more than 35 million in 2016. Globally, these highly urbanized consumers have become a powerful motor for global economic growth. Outperformers accounted for almost half of the growth in household spending of all emerging economies in the past 20 years.
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Jonathan Woetzel is a director of the McKinsey Global Institute, where Anu Madgavkar is a partner, Jeongmin Seong is a senior fellow, and James Manyika is chairman and director; Kevin Sneader is the global managing partner of McKinsey and is based in the Hong Kong office, Oliver Tonby is a senior partner in the Singapore office, Andres Cadena is a senior partner in the Bogota office, Rajat Gupta is a senior partner in the Mumbai office, Acha Leke is a senior partner in the Johannesburg office, Hayoung Kim is a consultant in the New Jersey office, and Shishir Gupta is a specialist in the McKinsey Knowledge Center in Gurgaon.