Historically labour intensive economies are less effective. Labour shortages incentivise innovation - which was one of the primary drivers behind the industrial and manufacturing revolutions in the West. The traditional route towards development has been the manufacture of goods using low cost labour. However, in light of the present urgency in cultivating sustainable development pathways and mitigating the effects of climate change this approach is no longer compatible. Therefore one of the central challenges is to ensure that the developing world increasingly follows a developmental approach driven by rising levels of skills and innovation instead of just exploiting low labour costs. However it was recognised that this will be exceptionally difficult as it involves invoking the “do as I say not as I do” axiom.
The emergence of China, Brazil, Russia and India as global economic actors will certainly involve a reconfiguration as to where global power lies – although there will also potentially be additional challenges in relation to shortages of food, housing and resources alongside environmental factors.
One of the primary differences between the developed and developing world is the point at which they invested in infrastructure. It is more expensive now to build road and rail networks, and invest in housing than it was 50 years ago. Countries that have a backlog in infrastructure investments will struggle unless they have significant reserves of natural resources (e.g. oil and gas) or high standards of domestic governance.