IMAGE VIA FULFILL
THE TIME needed for a poor country to double its income per person collapsed over the course of the 20th century. What took 50 years in the early 1800s took barely 20 by its end. That acceleration, powered by the spread of technology and the expansion of global trade, gave rise to a generation of theories about leapfrogging and catch-up growth. Yet the past two decades have exposed a puzzle: many economies have remained stuck despite wider access to global markets than ever before.
A new working paper by Joshua Aizenman, Hiro Ito and Jamel Saadaoui, drawing on an unbalanced panel of up to 145 economies from 1960 to 2024, offers an answer. Openness alone is not enough. Its growth payoff depends on where a country sits in the world’s trade networks, how diversified those links are and whether domestic institutions can convert external opportunities into productivity gains.
The paper revisits the flying-geese paradigm that once described East Asia’s sequential industrial upgrading. In that model, a lead economy pioneers new industries, moves into higher-value activities and passes older, labour-intensive production to followers with lower costs. The logic informed Lin Yifu’s “leading dragon” hypothesis, which identified China and India as new sources of industrial relocation. As China graduated from low-skilled manufacturing, it was expected to release a wave of labour-intensive activities to lower-income economies, opening a fresh window for structural transformation. But that prediction has not materialised for most of the world.
The Chinese case itself illustrates the limits of the extrapolation. Around China’s accession to the WTO, official American assessments projected expanding exports to China and only moderate import growth. The bilateral agreement emphasised tariff reductions and market-opening commitments. Administration statements argued that trade integration would reinforce reform. Instead, China’s combination of high growth, large current-account surpluses and rapid capability building allowed it to move from labour-intensive manufacturing into transport equipment, digital platforms and advanced industrial projects. Multinational firms gained market access, but joint ventures and supplier relationships accelerated local learning. Over time, the Belt and Road Initiative, industrial overcapacity and supply-chain security concerns prompted a policy reversal in the United States and Europe. The earlier win-win presumption gave way to fears of geoeconomic vulnerability.
The paper argues that traditional measures of openness do not fully capture how global integration affects growth. Simply counting trade agreements does not tell you much about economic success. What matters is how trade helps countries access larger markets, better technology, foreign investment and new ideas.
The authors show that countries with more balanced trade relationships across different geopolitical blocs tend to perform better. A wider network of economic ties helps countries absorb shocks and make better use of investment.
The results also show the limits of relying on commodities for growth. Commodity booms can create short-term gains, but they often fail to produce lasting economic transformation. Poorer-performing economies can remain stuck for long periods, while countries that achieve stronger growth are better positioned to catch up with richer ones.
The broader message is that copying China’s rapid rise will be difficult in today’s more fragmented global economy. Supply chains are increasingly shaped by security concerns, industrial policies and geopolitical tensions. But the answer is not to retreat from global markets. Countries need the foundations that make openness work: better education, stronger institutions, reliable infrastructure, economic stability and diverse trade links.
Global integration still offers opportunities, but success depends on how countries engage with the world and not just on how open they are. ■
