Emerging economies: muddling through to development

Abstract

Though ‘emerging economies’ is one of the widest used terms in discussions on global economies, it takes different meanings in different contexts to suit the main issue under discussion. An operational definition that could serve as a general description of this group it that they are low income, rapid growth countries using economic liberalization as their primary engine of growth under severe constraints of institutional deficiencies. The size and character of this group kept changing to accommodate the needs of the issue under discussion. Currently there are two main sub-groups within the conglomerate group of Emerging Economies (EE), namely: the developing countries in Asia, Latin America, Africa and the Middle East and the transition economies in the former Soviet Union and China. While it is often predicted by ‘economy-watchers’ that EE will be a major economic power in about 30 to 50 years, their growth and development are constrained by institutional deficiencies, which are summarized in this paper (based on a comprehensive survey of the literature) under the following sub-headings: (1) Underdeveloped institutions, (2) Unclear and inconsistent policies, (3) Inadequate governance, (4) Disjointed infrastructure (5) Limited funding options (6) Inhibiting culture, (7) Personalized networks, (8) Ill-funded and ambivalent education system, and (9) Reluctant internationalization. The overall impact of these inadequacies is that entrepreneurs have to overcome several constraints for setting up and growing their ventures. Hence much of their innovativeness would be exercised on devising the means to overcome these constraints rather than in designing, developing and marketing innovative products and services. Thus they tend to develop a style of muddling through towards venture creation and growth.