A New Engine of Development
The era of easy growth is over, but rich and poor countries can still join forces.
The garment industry in Bangladesh skyrocketed in the 1980s and 1990s. Once a desperately poor nation with sparse exports, Bangladesh became a global exporter of clothing, driven by the global economy's openness. Western brands seeking cheap production flooded the country with orders, leading to a surge in bank credit for building and expanding factories.
Daewoo from South Korea even came in to train the first generation of garment industry managers. By 2022, garment exports were over a thousand times larger than they had been, reaching $40 billion annually and employing around 4 million people. Simultaneously, the average annual income of a Bangladeshi increased from under $300 to roughly $2,600.
However, in Ethiopia, attempts to replicate Bangladesh's success faltered. After borrowing $1 billion abroad to build six industrial parks, Ethiopia's parks only employed 90,000 people by mid-2021 amid a backdrop of massive interest payments and dwindling local suppliers. The COVID-19 pandemic, civil war, and U.S. tariffs further crippled Ethiopia's economy, leading to default on its debt and an income level of around $1,000 per person.
The stark contrast between Bangladesh's industrial boom and Ethiopia's stagnation highlights the rise and fall of the post-Cold War development model. Countries joined the global economy, relying on Western demand and Chinese growth, benefiting from cheap labor, foreign credit, infrastructure, aid, and debt relief. From 1991 to 2016, poor countries grew twice as fast as rich nations, with incomes tripling on average.
However, the era of easy growth has ended. Rich countries are tightening markets, China is consuming more and exporting less, automation is replacing workers, and easy credit has turned into crushing debt. Consequently, poor countries are no longer catching up to the rich. This shift is weakening governments, sparking violence, and leading to the rise of autocratic regimes.
To break free from this cycle, developing nations must focus on their existing strengths, such as working mines, factory clusters, seaports, or cities, rather than pursuing grand, unattainable projects. Rich countries must also play a role, not just through charity, but by pursuing their own interests.
Written by urgent.news from Foreign Policy's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
