Just two years ago, emerging markets were all the rage. China, it seemed, could do no wrong and was destined to become the world's leading economy. Equity investors streamed into all the BRICS – Brazil, Russia, India, China and South Africa – reaping handsome short-term gains as economic growth (along with commodity prices) soared.

But that was then; now, clear skies have turned cloudy.

China's growth has slowed from 10 percent-plus to 6 percent, a pace too slow to realize the high expectations of hundreds of millions of people aiming for middle-class living standards. Brazil and South Africa have stalled in the face of major commodity-price shocks and intense political scandals; Russia, dependent on oil for income and an aggressive foreign policy for self-respect, is facing its most serious economic crisis since the end of the Soviet Union. Only India, it seems, stands tall

Was the emergence of the emerging markets just another bubble, one destined to collapse? Or is the downturn merely a speed bump on the path to global economic convergence? Well, no and no. The progress in emerging markets and developing countries over the past two decades was certainly no illusion. In fact, it was much bigger and broader than most people understand, involving some 60 countries and lifting more than a billion people out of poverty. And the indirect benefits have been profound for rich countries, too.

Alas, the downturn is also real, in particular for economies that have relied heavily on oil or hard-rock commodities like copper, iron ore and diamonds for export revenues. More-diversified developing countries are still growing, but the route back to the palmy days of a decade ago will be difficult.

All told, emerging-market growth rates are likely to remain modest for the near future, albeit with wide variation. But over a longer horizon, the outlook for robust progress remains solid, especially for those countries that diversify their economies, increase competitiveness and further strengthen institutions of governance. And it is in the best interests of the United States to help these countries succeed and to make sure we succeed along with them.

Tale Of the Tape

Before we can glimpse the future, we need to better understand the past. Since the early 1990s, an enormous transformation has been under way in the world's developing and emerging-market countries, with huge economic shifts, major political reconfigurations and unprecedented improvements in the quality of life. Most Americans remain unaware of the profundity of these changes, in large part because most don't think much about the world beyond the country's borders. But this inward focus has consequences: as a nation we have not yet fully recognized the repercussions of these shifts or the opportunities and challenges they create.

For while Japan's economy has stagnated, Europe's has stumbled and America's has limped ahead, developing economies that are home to more than half the world are breaking out of long stagnation. These changes are not universal, but they are widespread, encompassing around two-thirds of developing countries around the world. They range widely in their productive strengths, types of governments and protection of human rights. But pretty much all of them have shifted in varying degrees from state control toward market capitalism. Moreover, they are all better governed than they used to be; they are all investing more in health and human capital; they are more integrated into a world of open trade and capital mobility.

The consequences are easy to read in basic statistics. The number of people living in extreme poverty (defined by the World Bank as less than $1.90 a day in 2011 prices) has fallen from two billion to one billion since 1993. China accounts for about half the decline, but extreme poverty has fallen in dozens of countries around the world. Meanwhile, child death rates have been cut in half, while deaths from major infectious diseases – notably malaria, HIV/AIDS, tuberculosis and a slew of maladies linked to compromised drinking water – have fallen by a third or more. Famine is far less common, thanks to increased food production and better management and distribution of stockpiles. And women are finally getting a break: 90 percent of girls in developing countries now complete primary school.

The shift into high gear was quite abrupt. GDP growth per person in developing countries averaged precisely zero between 1977 and 1994. But since 1995, real growth has averaged 3 percent per person per year, with even faster growth in dozens of countries. As a result, average incomes have nearly doubled in just two decades – and that excludes the much greater growth in China. In practical terms, this advancement means that families can live in cement houses with tin roofs over their heads, feed themselves three meals a day, buy medicine when they need to and send their children to school.

At the same time, both international trade and financial flows in and out of developing countries have increased tenfold since 1980 in real terms.

Total trade by developing countries now exceeds $15 trillion a year – and, strikingly, a growing proportion is between developing countries.

Then there is the trend toward democracy and improved governance. In 1983, only 17 developing countries with populations exceeding one million were democracies; by 2013 that number had reached 56. Think of the Latin America of 30 years ago, when almost every country was a military dictatorship. Now the generals are gone and all but Cuba and, arguably, Venezuela, are democracies.

In Asia, where Singapore's Lee Kuan Yew once declared that democracy was incompatible with "Asian values", democracy (however imperfect) has replaced dictatorship in Bangladesh, Indonesia, Mongolia, Nepal, the Philippines, Sri Lanka, South Korea and Taiwan. (India, of course, has been a democracy since its independence.) About half of sub-Saharan Africa is now democratic, led, of course, by post-apartheid South Africa but including Botswana, Ghana, Liberia, Namibia, Senegal and Sierra Leone.

There has also been a major reduction in war and violence. This positive trend is obscured by daily stories of carnage in Syria and Afghanistan, not to mention on the streets of Mexican cities. But we tend to forget how violent the 1980s and early 1990s were, when almost all of the nations of West Africa, southern Africa and Central America were fighting civil wars, and the Shining Path was terrorizing Peru. As Steven Pinker showed in The Better Angels of Our Nature, despite perceptions to the contrary, we live in one of the most peaceful times in world history.

Growing Pains

So with all this progress, why are emerging markets suddenly in the dumps? The wounds have been partly self-inflicted think of Venezuela's gross economic mismanagement, corruption working its poisonous magic in Brazil and South Africa and Vladimir Putin's decision to fiddle while oil prices soared and crashed.

But three broad forces beyond the control of individual countries have been at work. The first is long-term structural change in China, which is facing diminishing returns to investment and a permanent shift to slower growth after decades of double-digit performance. China's productivity gains since 1980 had been enhanced by a flood of surplus labor moving from farms to factories. But that tide is drying up, and (as can be expected in a middle-income economy) labor is beginning to shift from manufacturing to services, where productivity gains are harder to come by. Moreover, China's low birth rate and rising life expectancy are beginning to work against it, as an ever-larger share of its population moves from working age to retirement.

But while the Chinese juggernaut has slowed, it is hardly likely to stop. With growth around 6 percent to 7 percent per year projected over the next decade, China will continue to have a positive impact on the world economy – though it can no longer be expected to carry it.

Second (and not unrelated), the long commodities boom is over. Commodities prices soared beginning in 2002 and doubled in just five years. But the realities of supply and demand have since reasserted themselves. For starters, China's appetite for oil, steel, aluminum, cement, precious metals and food, which had fueled the good times, has abated. Meanwhile, high prices attracted new investment in commodities production – most visibly in shale oil and gas, but also in hard-rock minerals. And the impact has been felt from Russia to Brazil to southern Africa. With prices this depressed, markets are likely to rise eventually – but not sufficiently to spark a return to the salad days of the early 2000s.

The third force slowing emerging-market growth is the ongoing hangover in the rich countries after the 2008-09 global financial crisis and the long recession and debt wind-down that followed. The United States is growing at a modest 2 percent-plus, while growth in Europe is anemic (about 1.5 percent), and in Japan it is almost nonexistent.

Not surprisingly, then, world trade, which expanded by nearly 7 percent a year in the decade between 1998 and 2007, has dawdled around 3 percent since the end of the recession. Capital flows to support the farms, factories, mines and wells of developing economies have correspondingly slowed.

While all this dims the collective outlook of developing economies for the next couple of years, the drag will not be felt uniformly. The drop in fossil-fuel prices is devastating for Saudi Arabia, Russia, Nigeria and Venezuela. Similarly, countries that depend heavily on copper or iron ore, including Brazil, South Africa and Zambia, are getting hammered. But low commodity prices are a boon to the majority of developing economies that are net commodity importers.

It follows that countries with diversified export earnings – and ongoing reforms that are raising productivity across many sectors – are doing much better. India's growth is projected to reach 7.5 percent in 2016. Bangladesh, Kenya, Panama, the Philippines, Tanzania, Mozambique and Vietnam, which are playing catch-up in the global development race, are all growing at a 6 percent rate. Indonesia is still growing around 5 percent , despite the fall in oil prices. In sum, the great transformation in emerging markets is far from over.

Convergence Is Not the Enemy

To the extent that Americans are aware of growth in developing countries, they tend to fear it, assuming that their gains are our losses. But while there are grains of truth to this concern – some Americans are paying a price – this is definitely not a zero-sum game.

In fact, the transformation in developing countries is profoundly beneficial to the West, and could be even more so if we respond smartly. The advances by the world's poor are central to enhanced global stability, which is vital for the United States. Indeed, continued development in emerging countries is a necessary condition for solving some of our most pressing problems, such as fighting terrorism, stopping the spread of pandemic disease, dampening pressures for immigration and stopping the worst impacts of climate change. As never before, the futures of rich and poor countries are inextricably linked.

Start with the reality that rising incomes, improving health and stronger governance all reduce the threat of violence within developing countries. And while the route from cause to effect may not be a straight line, domestic tranquility and stronger capacity to maintain security will diminish the likelihood that these countries will be used as springboards for global terrorism. Al Qaeda chose to launch its attacks from Sudan and Afghanistan precisely because they were failed states lacking the will or the way to stop them.

By the same token, prosperity and good governance lessen the need for international military intervention. As former U.S. secretary of defense Robert Gates put it, "development is a lot cheaper than sending soldiers."

Development also strengthens the capacity to fight pandemic disease and other threats to the global commons, such as drug trafficking and climate change. Guinea, Liberia and Sierra Leone were overwhelmed by the Ebola crisis in large part because they have weak infrastructures for guarding public health. Moreover, while the rich counties bear the bulk of the responsibility for causing climate change, they will not be able to fight it very effectively without building alliances and sharing costs and technologies with emerging economies.

Then, too, development reduces the incentives for migration that disrupt high-income countries' labor markets. If we want to slow (or simply rationally manage) migration, surely the best way is to make it more attractive for foreigners to stay home.

At a fundamental level, I also believe that development spreads and deepens values espoused by Western democracies. This isn't an open-and-shut case: growth has magnified bitter conflict between the urban middle class and the rural poor in Thailand, while the end of autocratic rule in Myanmar has given the Buddhist majority the green light to persecute the Muslim minority. But, by and large, progress has brought with it greater respect for human rights and greater incentives for international cooperation. The transformations in South Korea, Indonesia, South Africa and across Latin America are cases in point. And while contemporary China is no shining city on a hill, imagine how much more threatening it would be to its own citizens and to the rest of the world if Deng Xiaoping had not declared "to get rich is glorious."

India's development offers a parallel buffer against instability. When Americans pick up the phone to get help with their frozen PC screens and are greeted by a cheerful voice from Mumbai, their first thoughts may well be about the American workers who could have been at the other end of the line. But think of India's neighborhood, with Pakistan, Iran, Afghanistan, Bangladesh, Nepal and China all uncomfortably close. It is hard for me to think of anything better for that dangerous part of the world than a stable, democratic and economically vibrant India with growing opportunities for its citizens and strong ties with the West. I feel much more hopeful for the world when I talk to someone in Mumbai.

The most hotly contested (and least widely understood) issues revolve around trade. While the direct cost advantages of wide-open global commerce are more modest for the United States than pro-trade interests generally acknowledge, international commerce has been a big engine for progress in developing countries and has entangled would-be adversaries in a benign web of co-dependence. Jobs (or rather the rate of pay and stability of jobs) are important in this debate, but plainly miss the sizeable indirect gains from economic integration.

The economist's response is often just to argue that, even from the perspective of Americans alone, the aggregate gains outweigh the losses. It's probably true that we gain marginally more jobs than we lose from trade and that many of the new jobs are better paid. But that does not help the 55-year-old machinist in Ohio whose job migrated to Shenzhen or Guangzhou. And it should not be surprising that this unemployed machinist is receptive to Donald Trump's cries to sock it to the Chinese and show undocumented Mexicans the door.

The problem is not expanded trade per se but our failure to respond effectively to the dislocation it generates. Since the 1980s, Washington has given short shrift to the investments in human capital, technology and infrastructure (as well as improved safety nets) needed to help us compete in a changing global system without sacrificing those caught in the middle. 

We need more creative approaches – like providing subsidies for on-the-job training in private businesses, expanding apprenticeship programs, paying some of the costs of relocation so workers can move to the jobs and forging stronger links between businesses and technical colleges. In other words, we need to seriously up our game, not just blame others.

Staying the Course

The forces that have driven the global transformation of the past few decades are not transitory, and ongoing development will not depend on the serendipitous confluence of China's rapid growth and America's shop-till-you-drop consumerism. Far more important are the rise of neo-liberal economic policies, increased skills and the spread of competent governments across the developing world. Global integration has made critical technologies available to more and more people, while increasingly complex supply chains have forced a convergence of global business interests. State institutions have become more effective, with improved (if imperfect) legal systems, clearer property rights and greater respect for individual liberties.

Yes, the pace of progress will slow in the next few years, especially for countries suffering from the combination of relatively weak governance and near-total dependence on commodity exports. Indeed, it is hard to see how countries such as Russia, Saudi Arabia and Venezuela will break out of the traps they created for themselves. But looking ahead a decade or more, this major transformation will likely continue, with big benefits for rich and poor countries alike.

Getting from here to there, though, will require smart policy choices and strong leadership. In the near term, the countries under stress need adroit macroeconomic management, allowing currencies to depreciate, protecting foreign-exchange reserves and keeping budget deficits within prudent limits. Over the long haul, they must diversify their economies and reduce dependence on commodity exports. Doing so will require major investments in roads, electricity supplies, health and education, along with continuing efforts to rationalize regulation, reduce corruption and strengthen the rule of law.

For our (that is, high-income nations') part, we need to hold the line against protectionism and to bear the lion's share of the financial burden of curtailing climate change. Rich countries have contributed the most to global greenhouse gas emissions over the years, but it is the world's poorest countries that will bear the brunt of the damage. Fighting climate change will require leadership (and cash) from wealthy countries. By the same token, while ongoing technological change in pharmaceuticals, water management and alternative energy sources will benefit developing countries as much as or more than the rich ones, most of the R&D will need to come from the advanced economies.

The pause in breakneck growth now being experienced in the developing world is costly. But it's only a detour on a path toward global economic convergence that should be celebrated and supported. Our future – as well as theirs – depends on it.