One generation later, Ethiopia tried to climb the same ladder but found its rungs broken. The country borrowed $1 billion abroad, spending most of it to build six new industrial parks. By mid-2021, all of Ethiopia’s parks together employed only about 90,000 people in a country where 2 million new workers enter the labor force each year. Bangladesh, China, and Vietnam already dominated labor-intensive manufacturing, while India and the Philippines had captured much of the low-cost services trade. Automation, meanwhile, was reducing the value of cheap labor. Because the new factories imported most of their inputs from abroad, few local suppliers developed. All the while, the parks carried nearly $500 million in scheduled interest payments. The triple hit of the COVID-19 pandemic, civil war, and new U.S. tariffs drove out investors and shuttered businesses. Ethiopia defaulted on its debt. Income per person remains around $1,000 a year.

The contrast between Bangladesh’s boom and Ethiopia’s plight reflects the rise and fall of the post-Cold War development bargain. In the 1990s and 2000s, low- and middle-income countries could join a globalizing economy and ride Western demand as well as Chinese growth. Rich-country consumers bought their exports; multinationals turned cheap labor into factory jobs; foreign credit financed infrastructure; aid and debt relief propped up fragile states. The results were historic: From 1991 to 2016, poor countries grew twice as fast as rich ones—and nearly three times as fast if one includes China and India. Among poor countries, incomes tripled on average, child mortality and conflict deaths fell roughly by half, and the number of democracies doubled. Development began to look almost plug-and-play: Sell abroad, borrow to build, and enjoy the boom.

Now, the era of easy growth has ended, and the old rules of development no longer hold. Rich countries are closing markets. China is buying less and exporting more. Robots and artificial intelligence are replacing workers. Easy credit has become crushing debt, and foreign aid is being slashed. Consequently, poor countries are no longer catching up to rich ones. The resulting distress is weakening governments and fueling violence. Thirteen poor-country democracies have collapsed into autocracy, reducing their ranks by a quarter. Battle deaths have more than doubled, with nearly one-third of Africa’s 54 countries embroiled in war, and global child deaths before age 5 were projected to rise in 2025 for the first time in decades.

Stemming this slide will require poor countries to find a different path of development than the one they could rely on in the past. They will need to build outward from their strongest footholds—a working mine, factory cluster, seaport, or city—rather than pouring scarce capital into grand projects and hoping an economy forms around them. Rich countries must help, not from charity alone but from self-interest. The poorest countries will add more than a billion people over the next two decades and account for virtually all global population growth. Without jobs, those youth bulges will fuel conflict, migration, and disorder. But the same demographic imbalance could anchor a new bargain: Aging rich societies have capital but too few workers; poor countries have workers but too little capital. Linking them through intermediate production, digital services, skills partnerships, and legal migration could create a new engine of development—less powerful than the old one but potentially more durable.

---

The post-Cold War convergence boom was a historical anomaly. For nearly two centuries, from the Industrial Revolution to the end of the Cold War, the income gap between rich and poor countries widened, exceeding 8-to-1 by 1991. But by 2016, the ratio had narrowed to 5-to-1. Poor countries had not suddenly solved the problems that held them back. Rather, the end of the Cold War and the opening of the world economy allowed them to tap what they lacked at home: customers, production systems, capital, and state capacity. Those external supports enabled even weak countries to grow. Now all four growth accelerators are giving way.

First, poor countries are losing the foreign customers who once compensated for their tiny domestic markets. All 72 countries currently classified by the World Bank as low- or lower-middle-income collectively consume only one-quarter as much as the United States. Globalization briefly solved that problem: Rich countries bought their manufactured goods, while China devoured their commodities. At the peak, China alone purchased about one-quarter of sub-Saharan Africa’s merchandise exports.

But now markets are closing. Since 2016, the number of discriminatory trade measures affecting poor countries has risen 72 percent. In 2025, U.S. tariffs on the world’s least developed countries averaged twice those on developed economies. China, meanwhile, is climbing the manufacturing ladder but not leaving the lower rungs behind for others to ascend. It now produces a third of the world’s manufactured output—more than three times its share in 2004—and its trade surplus has tripled since 2018. Yet China still accounts for nearly two-thirds of the global value added in low-skill exports from poor countries, including apparel, textiles, leather, and footwear—the labor-intensive industries through which earlier industrializers such as Bangladesh began their ascent. Poorer countries may stitch the final shirt or shoe, but China increasingly supplies the fabric, yarn, trimmings, and other inputs—and retains much of the income, employment, and know-how.

Second, many poor countries are deindustrializing before they get a chance to develop. Globalization pulled them into multinational supply chains, which by 2010 accounted for roughly half of all developing-country exports. The work created jobs and raised incomes but rarely a full industry. Poor countries handled one stage—often assembly or processing—while foreign firms controlled the brands, technology, and supply chains.

Now, even those narrow roles are disappearing. The number of industrial robots per 10,000 manufacturing workers worldwide more than doubled between 2016 and 2023, and multinationals are concentrating production in established hubs closer to rich-country markets. Since the 2000s, export-related employment has roughly halved in some poor countries, altogether falling by 45 million between 2007 and 2018 alone, with many of the remaining jobs vulnerable to automation. Whereas rich countries gradually shed factory jobs after becoming rich, poor countries are losing them at roughly one-twentieth the income level, long before white-collar office jobs can emerge to absorb the workers. As a result, 60 to 80 percent of the working population scrapes by in the informal sector, including subsistence farming, street vending, and day labor.

Third, foreign money is drying up. From the late 1980s to the mid-1990s, net private capital flows to developing countries rose more than sixfold. Beginning in the 1990s, multilateral institutions and rich-country governments provided more than $100 billion in debt relief to heavily indebted poor countries. China then added another wave of easy money, extending more than $800 billion in new loans between 2000 and 2017. All told, poor countries borrowed more than $1 trillion abroad from 1990 to 2017, tripling their foreign debt.

Then the flow reversed. Chinese lending fell from $87 billion in 2016 to under $4 billion in 2021. By 2023, one-quarter of developing economies had lost access to bond markets. From 2022 to 2024, they paid foreign creditors $741 billion more than they received in new disbursements. Interest payments have quadrupled over the past decade, pushing more than half of poor countries into debt distress or a high risk of it. As a result, some 3.4 billion people live in countries where governments spend more on interest than on health or education.

Fourth, poor-country governments are losing the outside support that once propped them up. Aid, debt relief, and peacekeepers supplied resources and services that many states could not provide on their own. Rich-country aid rose 69 percent from 2000 to 2010, while U.N. peacekeeping expanded from 11,000 personnel in 1989 to 125,000 by 2015. During the 2000s, real per person spending on health and education rose by about 4 percent a year in low-income countries with IMF programs. Between 2000 and 2017, life expectancy in low-income countries increased by nearly nine years.

But much of this global aid industry bypassed recipient governments and did not build local capacity. In 2020, recipient governments and local organizations directly managed less than 9 percent of U.S. aid. It was mainly foreign contractors that delivered services—and then left with the money and expertise. Now, the whole apparatus is shrinking. Among OECD member states, eight of the 10 largest donors cut aid in 2024. The Trump administration terminated 86 percent of U.S. Agency for International Development programs, and the number of U.N. peacekeepers has fallen 60 percent from its peak. As foreign support fades, poor countries must do more with less.

The question is how.

---

The first rule for development in this new era is to abandon the search for a universal model. Some economists still advise poor countries to copy East Asia. They might as well tell them to invent fusion. East Asia’s rise depended on a rare Cold War bargain: The United States protected key allies, helped finance their growth, and opened its market to their exports, all in the name of building strong anti-communist bastions. That bargain is gone.

The right strategy now depends on two questions: What does a country have that outsiders want? And what can its government actually do? Countries with valuable assets can bargain for better terms. Countries with little such leverage but some governing capacity must take something that already works—an industry, city, or trade route—and build outward. Countries unable to do either must first keep the state from falling apart. Development begins by matching ambition to reality.

---

For the first group, today’s fractured global economy creates a real opening. Rich countries are scrambling to secure critical minerals, diversify energy supplies, reroute trade, and reduce their dependence on geopolitical rivals. That raises the value of copper, cobalt, lithium, and phosphates but also of ports, shipping lanes, and transport corridors. Egypt controls the Suez Canal. Djibouti and its neighbors sit astride the entrance to the Red Sea. Mineral producers and strategically located states can offer major powers something they increasingly prize: a safer source of supply or a more secure trade route.

But leverage is not development. Strategic premiums can disappear when new mines open, technologies change, or trade routes shift. The goal is to trade temporary leverage for assets that will remain valuable after the moment passes: railways, ports, reliable power, worker training, local processing, or foreign market access. The best bargains are concrete and enforceable. A mineral producer might guarantee supplies in return for electricity and transport infrastructure. A country controlling a port or corridor might seek investment that connects local firms to the commerce passing through it.

Several countries are testing this strategy now. Morocco is combining proximity to Europe, modern ports, trade agreements, an established automobile industry, and deposits of key minerals to attract investment in electric vehicles and battery materials. Zambia has gained bargaining power from rising demand for copper and international interest in the Lobito Corridor. Its challenge is to turn that attention into reliable electricity, better transport, local processing, and industries that can survive after the mineral boom fades. Neither is a finished success story. Both are tests of whether countries can turn today’s scramble for secure supplies into lasting productive capacity.

The logic, however, is not new. Botswana provides the clearest precedent that shows why state capacity matters. It put mineral rights under national control and formed a 50-50 joint venture with De Beers, which supplied the expertise. Just as important, diamond revenues flowed into the national treasury rather than the pockets of a ruling family or private magnate. A relatively capable, well-paid civil service invested the proceeds in roads, schools, hospitals, and public institutions. The bargain helped lift Botswana from poverty to upper-middle-income status.

---

The second group lacks a scarce resource or strategic asset but has two things that still matter: a functioning state and at least one cluster of firms already selling to real customers. In the old era, countries could build new industries on the back of cheap credit, expanding trade, and the spread of multinational production. With those supports now weaker, the safer strategy is to build outward from what already works by removing the specific barriers that keep existing firms from growing. A factory may need reliable electricity. Exporters may need faster customs. Farmers may need cold storage. Local suppliers may need financing, technical assistance, or help meeting foreign standards.

Public support makes sense when it clears such bottlenecks and helps firms hire, export, train workers, or source more inputs locally. It becomes wasteful when it props up firms that cannot compete or builds capacity before customers exist. Ethiopia’s industrial-park drive shows the danger. In a tighter global economy, governments have less room for that kind of gamble. They need to build around demonstrated demand.

The strongest precedents come from countries that secured footholds before today’s squeeze and then used them to build broader capabilities. Malaysia entered electronics when multinational firms were spreading basic assembly across Asia. The government improved infrastructure, trained workers in partnership with employers, and helped Malaysian companies become suppliers. Workers moved into engineering and management, while local firms began producing parts, equipment, and services. Multinationals still dominate the sector, but Malaysia used their presence to build skills and supplier networks that could survive any single investor.

Vietnam pushed the same process further during the last great expansion of global supply chains. Its share of world trade rose from 0.1 percent in 1996 to 1.5 percent in 2023, making it the world’s 19th-largest exporter. Foreign electronics factories created jobs, trained workers, and helped turn the country into a manufacturing center. Foreign firms still produce nearly three-quarters of its exports, but Vietnam has used successive waves of investment to improve infrastructure and move toward more sophisticated production. Few countries starting today will get an opening on that scale, but the underlying principle still applies: to use the first cluster to make the next one easier to build.

Mauritius shows what’s needed when the original foothold begins to fade. It used sugar exports to finance education and infrastructure and then moved into clothing. When trade preferences weakened and Chinese competition crushed low-wage producers, Mauritius upgraded the factories that could remain competitive and expanded into tourism, finance, information technology, and business services. Each industry supplied skills, infrastructure, and revenue that helped support the next. The broader lesson from Malaysia, Vietnam, and Mauritius is to treat a successful foothold as a platform rather than an end point.

Many countries today will have to begin on a much smaller scale. The foothold may be one city, one transport corridor, or one unusually capable company. Bengaluru became a global software hub while much of the rest of India was still poor and badly governed. Ethiopian Airlines built a pocket of advanced capacity in an otherwise destitute economy. Such pockets are unlikely to produce a national takeoff on their own. But they can generate skills, suppliers, tax revenue, and evidence that the state can deliver—creating a base from which the next pocket of growth can emerge.

---

Some countries lack even a foothold for growth because the state cannot maintain order, collect revenue, or provide basic services. For them, the immediate task is to establish enough political and fiscal order for the state to function.

That usually begins with control over a limited core rather than the entire national territory. A weak government may first secure the capital city, a major port, and the major roads carrying food, fuel, and trade. Some armed groups may have to be defeated; others can be brought into the system through local autonomy, political representation, or a share of public revenue. Somaliland built peace through agreements among clans before constructing national institutions. In Indonesia’s Aceh province, separatists abandoned independence after Jakarta withdrew troops, allowed local political parties, and gave the province a larger share of oil and gas revenues. In both cases, political settlement created the space for state authority to expand.

Order must then produce tax revenue. Ports, border crossings, mines, and large companies are often the easiest places to start. The harder task is to bring those revenues into a single national treasury, limit their diversion, and use them to pay soldiers, police, teachers, and other civil servants on time.

Georgia shows how quickly basic state capacity can improve when a government concentrates on a few core functions. After the 2003 Rose Revolution, the nearly bankrupt new government cut the number of taxes from 21 to seven, lowered rates, dismissed corrupt officials, replaced the police force, and enforced the rules that remained. Within four years, tax revenue rose from 14 to 25 percent of GDP. That revenue allowed the government to pay its employees and restore basic services.

The threshold is modest but demanding: secure key areas, collect revenue, pay public workers, and keep essential roads, courts, clinics, schools, and power systems running. Once that core exists, governments can begin pursuing the kinds of foothold strategies described above. Without it, industrial parks, new ministries, and sweeping development plans have little to build on.

Even capable governments, however, still depend on access to the markets, capital, technology, and security that richer countries largely control. The next question is what richer countries should provide—and why doing so would serve their own interests.

---

Rich countries cannot re-create the post-Cold War growth boom. But they can build mutually beneficial relationships around a basic imbalance: Rich societies are aging and shrinking, while many of the poorest countries—in most of sub-Saharan Africa as well as parts of the Middle East, South Asia, and Central Asia—remain young and growing. Rich countries need workers and reliable suppliers. Poor countries need jobs, investment, and access to larger markets. Each increasingly has what the other lacks.

The stakes are enormous. By 2050, many rich economies will lose 15 to 40 percent of their populations between ages 25 and 49, while Africa will add an estimated 1 billion people. That imbalance could fuel growth or instability. Roughly 12 million to 15 million Africans enter the labor market each year, but only around 3 million formal jobs are created. In 2024, nearly half of Africans surveyed across 24 countries said they had considered emigrating.

The consequences become more severe when weak economies collide with weak states. The Syrian civil war helped drive more than 1 million asylum-seekers into Europe in 2015, overwhelming border systems, dividing governments, and strengthening anti-immigrant political parties. Africa now has more conflicts than at any point since at least 1946, while the number of people displaced on the continent more than tripled between 2009 and 2023 to 32.5 million. A continent adding a billion people amid spreading violence could produce far greater shocks than Syria did. Rich countries therefore have a direct interest in helping poorer ones to create jobs and preserve order: They gain workers, customers, and suppliers while reducing the risks of uncontrolled migration, regional war, and political backlash at home.

The practical agenda should be narrow and concrete. Rich countries can offer poor countries access to their markets, financing, and legal work visas. In return, poor countries can provide reliable supplies, train workers for specific shortages, and cooperate on migration enforcement. A U.S. or European buyer might guarantee purchases from a new supplier if the supplier’s government improves the power grid or port serving the factory. A rich country short on nurses or electricians might open a legal visa channel if the sending country helps train workers and takes back those who overstay. The point is to tie each benefit to a concrete obligation on the other side.

Multilateral institutions can help make those arrangements work. The World Bank can finance infrastructure or risk insurance that makes an otherwise viable investment possible; the IMF can keep a currency crisis or bankrupt treasury from destroying productive firms. Their value lies in supporting opportunities that already have a commercial or political foundation, rather than trying to create one from scratch.

---

The starting point is customers. Firms cannot grow if they are trapped in small domestic markets. Access to richer consumers gives developing countries the demand they need to expand while giving rich countries new suppliers and future markets.

Poland shows how powerful that access can be. In 1991, it was poorer per person than Botswana. Today, it is roughly as rich as Japan when one adjusts for purchasing power. Aid, foreign investment, security guarantees, and domestic reforms all helped. But integration with Europe supplied the engine: Polish firms could sell freely to hundreds of millions of richer consumers and join European supply chains.

Most poor countries cannot join the European Union, but richer countries can still give them better access to their markets. The U.S. African Growth and Opportunity Act increased U.S. imports from Africa, while access to Western clothing markets helped Bangladesh build a garment industry that now employs millions of people. When firms can reach large markets, successful exporters can hire more workers, invest, and pull local suppliers along with them.

Digital services offer another route. U.S. tariffs apply to imported goods, not services, and technology is making it cheaper to deliver accounting, software testing, research, design, and customer support across borders. A worker in Nairobi or Dhaka can serve a firm in New York or London without emigrating or shipping a product through a tariff wall. Rich-country firms get access to lower-cost talent; poor countries get export earnings and skilled jobs. The limits are real: Many of these jobs require education, reliable electricity, broadband internet, and language skills, and they will not absorb workers on the scale that factories once did. But they can still give some countries a pathway into the global economy.

Regional trade can help as well. Many poor regions already have trade agreements on paper, including Africa’s continental free trade agreement. The problems keeping firms from reaching customers are often physical: bad roads, congested ports, unreliable power, weak payment systems, and slow border crossings. Development banks can help finance these missing links wherever producers stand ready to use them.

---

Market access, however, matters only if firms can produce what customers want. Rich countries can help by steering more of their business toward developing countries that are ready to take it on—and then helping local firms to clear the obstacles that hold them back.

The Western shift away from China creates the biggest opportunity. Rich countries want supply chains that are less vulnerable to disruption or coercion, and some developing countries are well placed to meet that demand. U.S. investment helped Mexico expand its vehicle, electronics, and medical equipment industries. Foreign firms turned Vietnam into a major base for electronics and machinery. India is adding the manufacture of smartphones, medicines, and semiconductors to its strength in services. As Western companies diversify, more of their investment can flow to developing countries that already have workers, infrastructure, and state capacity.

If most countries will not become manufacturing powers on that scale, smaller opportunities still matter. A foreign buyer might help a supplier buy equipment or meet Western safety and quality standards. A company might pay for worker training, a power connection, or a better road to the port if that investment makes deliveries possible. Governments can provide insurance or help cover upfront costs when the result is a safer supply chain. The basic rule is to start with a real customer and solve the problems that keep a local firm from serving it.

Finance should follow the same logic. Too many poor countries have borrowed heavily for projects that produced little revenue. Some will need debt relief, but future borrowing should be tied more closely to projects that can support themselves or unlock real business. Better disclosure of debts and loans would also make it harder to repeat the mistakes that created today’s crises. Otherwise, debt relief simply restarts the cycle: borrow, default, forgive, repeat. The World Bank can help finance useful infrastructure; the IMF can keep debt or currency crises from wiping out viable firms. Both are most useful when they support economic activity that already has a market.

Trade and investment, however, will still leave millions of people without good jobs. Legal migration can relieve some of that pressure but only on terms rich countries can absorb. Governments should set firm limits, target occupations with genuine shortages, and enforce visa rules. Rich countries need nurses, caregivers, electricians, builders, and farm workers; poorer countries can supply some of that labor in return for jobs, training, and remittances. Employers, not taxpayers, should bear most recruitment and training costs, and many visas should be temporary, with clear rules for return. Used selectively, migration can help fill real labor gaps without turning labor shortages into an open-ended commitment to absorb everyone who wants to come.

---

Most jobs must still be created in poor countries themselves. In the weakest states, even that goal may be unrealistic. Companies will not build factories where warlords run rampant and electricity and water routinely fail. Rich countries are unlikely to rebuild these states either. Aid and peacekeeping are shrinking, and voters have little appetite for another era of nation-building. The interventions that helped end wars in Sierra Leone and Liberia required years of troops, money, and political attention. Few governments would make that commitment today.

The alternative is damage control. State collapse sends refugees, epidemics, piracy, and violence across borders. It disrupts trade routes and can drag functioning neighbors into crisis. Outside powers should therefore concentrate on keeping local disasters from becoming global catastrophes. During the 2014-16 West African Ebola outbreak, foreign assistance kept clinics operating, traced infections, and stopped the epidemic from spreading further. Similar efforts can keep a port open during a food shortage, pay health workers when a treasury collapses, or sustain a cease-fire long enough to prevent a local war from widening.

If the state falls apart anyway, the priority shifts to its neighbors, which usually take the first and hardest hit. During the Syrian war, refugees flooding into Jordan and Lebanon came to equal roughly one-seventh and one-quarter of those countries’ populations, respectively, crowding schools, driving up housing demand, and straining hospitals, water systems, and municipal services. By September 2015, each country had taken in more Syrian refugees than all of Europe combined at the time, even though Europe’s smaller influx had already triggered a political crisis. Supporting front-line states may therefore do more to contain a war’s fallout than pouring money into a country whose government has already disintegrated.

The broader strategy is triage. Where the foundations for growth exist, rich countries should open their markets, steer investment toward viable firms, and admit limited numbers of workers where there are genuine labor shortages. Where states are fragile, they should help keep basic government functions running. Where states collapse, they should reinforce neighboring countries, contain disease and displacement, protect trade routes, and keep food and medicine moving.

The old order and the global convergence boom it sustained are not coming back. Humanitarian appeals alone will not replace them. But cooperation rooted in mutual interest can still create growth where the foundations exist—and limit the damage where they do not.