In the absence of economic opportunity at home, young people often choose one of two options: look for opportunity elsewhere or take to the streets in protest. The former choice pushes young, ambitious people toward richer markets, many of which -- like Sweden, Switzerland, and Germany -- increasingly need them because of aging populations. The United States, meanwhile, attracts more than 1 million people each year for study and work opportunities, and this does not take into account illegal immigration. The effect is generally a negative one for emerging markets, which are losing their most talented young people and, with them, economic potential.
With regard to the latter choice, technology for organizing protests, even across disparate groups, has improved dramatically in the last decade. We saw the effect of this in Brazil, where protests over increased bus fares and the buildup of glitzy stadiums for the next World Cup evolved into demonstrations against the lack of opportunities for urban youth. Similarly, in Turkey, a protest against the construction of a shopping mall on the grounds of a city park in Istanbul escalated into countrywide demonstrations against the political regime. However, while such protests have toppled ossified regimes in the Arab world, they have also resulted in economic chaos and social unrest that have hurt emerging markets' growth. What initially inspired protesters in emerging markets to challenge their governments is now giving others pause.
The fourth cause of emerging markets' slowing growth is having the most profound effect in terms of slowing that growth. It is the lack of institutions that support the smooth functioning of society and the inclusion of larger parts of the population in the increased well-being of countries. In the last few decades, many emerging markets have focused on economic growth at the expense of building social safety nets. One example is China's nascent pension system, which is responsible for an increasingly large share of the population, yet is not up to the task. (According to the World Bank's World Development Indicators, in 2014, the working-age population will start shrinking for the first time, which means more dependence on pensions.) India and Brazil have more favorable demographics but are struggling to create enough employment to keep their pension systems funded. Other examples of institutional weaknesses include the lack of food-safety standards in China and India, Brazil's still-inadequate health-care system, and Indonesia's inchoate environmental protections.
These and other problems of maturing economies can be dealt with, but at significant public cost. This draws resources away from infrastructure projects and talented people away from export-oriented businesses -- the traditional backbone of fast growth in emerging markets. The result, then, is slower growth. And if the process of building complementary institutions is not smooth, growth is further hampered.
There are, however, many reasons to be upbeat about emerging markets. First, continued peace and better governance in Africa has established a basis for growth in countries such as Angola, Ethiopia, Ghana, Kenya, Nigeria, Rwanda, and Zambia. On average, Africa's economy has been growing at more than 5 percent annually since 2007, and one-third of African countries are growing at more than 6 percent each year. Moreover, the share of the population living below the poverty line in Africa has fallen from 48 percent in 2007 to 39 percent in 2012. To be sure, Africa needs significant capital inflows to build up its infrastructure; it currently invests less than 4 percent of GDP in infrastructure, one-third of what Asia invests. As this investment increases, so will the efficiency of Africa's industry. The inequality between urban and rural communities will also decrease, as more people become connected to job opportunities.
Second, emerging markets are catching up on education, which, according to economics research, makes workers more productive. According to the World Bank, by 2012, over 93 percent of children in emerging markets had received primary education, up from 82 percent in 1999. And a much higher percentage of girls -- as much as 20 percentage points more -- had received an education, compared with only a decade earlier. The focus on improving education has received a boost from the inclusion of education indicators in the Millennium Development Goals.
Third, the global demand for the goods and services provided by emerging markets is still growing. The Indian subcontinent has the potential to bring at least several hundred million people from rural areas to the manufacturing and services sectors to meet this demand. This will increase overall productivity in the export sector and, in turn, create an even larger consumer market at home. Moreover, slower growth in resource-dependent China is good news for resource-rich BRICs such as Brazil and Russia, as well as for Africa and the rest of Latin America. The increasing consumer demand in the United States and Western Europe after the financial crisis is also boosting growth rates in emerging markets. The Sept. 18 announcement by the U.S. Federal Reserve that it's delaying the tapering of easy money will encourage still further growth in this consumer demand.
Fourth, the past decade has witnessed a marked improvement in the governance and regulatory indicators in emerging markets. The Worldwide Governance Indicators, as measured by the World Bank, show improved scores in the rule of law and control of corruption in 36 emerging economies between 1999 and 2012. Noteworthy in their advancement are countries such as Indonesia, Costa Rica, Ghana, Peru, Ethiopia, and Rwanda. Another World Bank index, Doing Business, shows a similar trend: Of the 10 fastest-improving countries in terms of ease of doing business last year, nine were emerging markets. These included Costa Rica, Sri Lanka, Mongolia, and Kazakhstan. Over a 10-year period, the fastest-improving countries in terms of business regulation include Colombia, China, Georgia, Rwanda, Burkina Faso, and Egypt. Looked at broadly, better governance and an environment more conducive to business attracts more investors to emerging markets, increasing their growth potential.
It would thus be unwise to write off growth in emerging markets. Yes, some of the largest emerging markets, particularly the BRICs, are experiencing growing pains. These are likely to result in governments paying more attention to institutional and social development. And unlike in the golden age of emerging markets, growth is going to be more balanced, both geographically and across sectors. Yet the fundamentals for growth in emerging markets remain strong and, with them, the prospects for the future.