The Next Convergence: The Future of Economic Growth in a Multispeed World

by Michael Spence

Overview

A Washington Post Notable Nonfiction Book

Michael Spence, winner of the Nobel Prize in Economic Sciences, clearly and boldly describes what's at stake for all of us as he looks ahead to how the global economy will develop over the next fifty years

With the British Industrial Revolution, part of the world's population started to experience extraordinary economic growth—leading to enormous gaps in wealth and living standards between the industrialized West and the rest of the world. This pattern of divergence reversed after World War II, and now we are midway through a century of high and accelerating growth in the developing world and a new convergence with the advanced countries—a trend that is set to reshape the world.

Nobel Prize winner Michael Spence explains what happened to cause this dramatic shift in the prospects of the five billion people who live in developing countries. The growth rates are extraordinary, and continuing them presents unprecedented challenges in governance, international coordination, and ecological sustainability. The implications for those living in the advanced countries are great but little understood.

Spence clearly and boldly describes what's at stake for all of us as he looks ahead to how the global economy will develop over the next fifty years. The Next Convergence is certain to spark a heated debate how best to move forward in the post-crisis period and reset the balance between national and international economic interests, and short-term fixes and long-term sustainability.

Product Details

ISBN-13:	9781250007704
Publisher:	Picador
Publication date:	08/07/2012
Pages:	320
Product dimensions:	5.62(w) x 8.06(h) x 0.84(d)

About the Author

Michael Spence is a Professor of Economics at the Stern School of Business at New York University, a senior fellow at the Hoover Institution, and was the chairman of the independent Commission on Growth and Development. Winner of the Nobel 2001 Prize in Economic Sciences, he lives in California and Italy.

Read an Excerpt

As the global economy emerged in the post war period, the colonial system disappeared. Old colonies became new countries, some of them with very odd shapes and geographical positions. With no history of self-governance as nation states, they struggled to find their way, economically and in terms of stable governance. India created the world’s largest and most complex democracy—a modern miracle. China turned to communism, adopted the centrally planned model of economic organization, and made very little measurable economic progress for 29 years, but perhaps sowed the seeds of its future rise by educating the vast majority of its people. It dramatically changed direction in 1978 and became the largest (in population) and fastest growing country in the history of the world.

What no one saw clearly was that in the post war period, the economic party that had been running for 200 years in a small subset of the population was about to spread to much of the rest of the world.

The implications of this new convergence are profound and extensive. The costs of things will change. Goods and services that require human time and effort will become relatively more expensive, an inevitable consequence of the eventual decline of low cost underemployed labor in the global economy. Economic forces and incentives will try to make them less expensive by allocating more capital to labor and hence reducing the labor input required. But there are limits to substituting capital for labor, though these limits are moving as technology changes the art of the possible. The abundance of underemployed labor in the world economy has in a sense delayed the arrival of labor saving technology. But this will end in the current century.

Table of Contents

Preface xi

Introduction 3

Part 1 The Global Economy and Developing Countries

1 1950: The Start of a Remarkable Century 11

2 Static Views of a Changing World 15

3 Postwar Changes in the Global Economy 18

4 The Origins of the Global Economy 26

5 Economic Growth 31

6 Common Questions About the Developing World and the Global Economy 42

Part 2 Sustained High Growth in the Developing World

7 The High-Growth Developing Countries in the Postwar Period 53

8 The Opening of the Global Economy 56

9 Knowledge Transfer and Catch-up Growth in Developing Countries 58

10 Global Demand and Catch-up Growth 64

11 The Internal Dynamics of Sustained High Growth 69

12 Key Internal Ingredients of Sustained High-Growth Recipes 71

13 Opening Up: An Issue of Speed and Sequencing 89

14 The Washington Consensus and the Role of Government 92

15 Managing One's Currency in the Course of Growth 97

16 The Middle-Income Transition 100

17 The Political, Leadership, and Governance Underpinnings of Growth 104

18 Low-Growth Economies in the Developing World 112

19 Natural Resource Wealth and Growth 116

20 The Challenge for Small States 120

21 The Adding-Up Problem 122

Part 3 The Crisis and its Aftermath

22 Emerging Markets During and After the Global Crisis 131

23 Instability in the Global Economy and Lessons from the Crisis 140

24 Stimulus in the Crisis and the Need for Cooperative Behavior 148

25 Rebalancing the Global Economy and Its Consequences for Growth 150

26 The Excess-Savings Challenge in China 161

27 The Openness of the Global System and the WTO 166

28 Legacies of the Crisis: Slow Growth and Sovereign-Debt Issues in Advanced Countries 169

29 Periodic Systemic Risk and Investment Behavior 174

Part 4 The Future of Growth

30 Can the Emerging Economies Sustain High Growth? 187

31 China and India 191

32 China's Structural Challenges 194

33 India's Growth, Diversification, and Urbanization 199

34 Brazil's Growth Reset 203

35 Energy and Growth 206

36 The Challenge of Climate Change and Developing-Country Growth 209

37 Information Technology and the Integration of the Global Economy 222

38 European Integration and Transnational Governance 244

39 Global Governance in a Multispeed World 247

40 The G20, the Advanced Countries, and Global Growth 260

41 Sustaining Growth: The Second Half Century of Convergence 270

Notes 275

Index 283

Editorial Reviews

Impressive...Spence offers deep insights with a winning, refreshing humility rarely seen in Nobel Prize-winning economists.” —The Washington Post

“An intelligent, rational, an dhumane book about the great economic event of our era...Anyone seeking a commonsense guide to the transformation underway need look no further.” —Financial Times (London)

“Cogent, comprehensive, and compelling...Especially trenchant and timely.” —The Huffington Post

“Rarely does one find a book that is so powerful in its analysis, timely in its topic, relevant in its thinking, and clear in its exposition.... This is by far the best book I have seen on today's historical growth transformation.” —Mohamed A. El-Erian, author of When Markets Collide

“Fascinating...Having Spence as a brilliant guide, intimate with both the research and policy frontiers, is a perfect way to get up to speed.... Engaging, intellectual treatments like this one will surely make progress easier.” —Science

From the Publisher

In The Next Convergence, [Spence] presents a nuanced, highly readable argument on the symbiotic, fraught relationship between today's booming developing markets and the seemingly stagnant developed ones…Spence's use of data and history is as impressive as his avoidance of empty sloganeering. Rather than offer deterministic and hopelessly naive bromides, Spence offers deep insights with a winning, refreshing humility rarely seen in Nobel Prize-winning economists.
—The Washington Post

Daniel Gross

I always knew that Mike Spence was a terrific economist. After reading this book I realize that he also has the rare ability to see the world economy--all of it, rich and poor--with clarity, reason and empathy. If you are looking for a lucid, readable, consistent, unprejudiced picture of what has been happening and what might happen next in the world economy, this is an excellent place to find it.

winner of the 1987 Nobel Memorial Prize in Economi Robert Solow

In recent years, developing countries have become an increasingly important driver of growth in the world economy, bringing about the prospect of a new and multi-polar landscape of the global economy in which the traditional gap in living standards between developing and advanced countries may possibly disappear. Michael Spence has written a succinct and clear analysis of the forces behind this fascinating process that is immensely readable, yet does justice to the complexity of the issues involved. Among the many books written on the new world economy this is one of the most profound. A must-read for everyone interested in the mega-trends shaping the future of the world economy.

World Bank Senior Vice President and Chief Economi Justin Yifu Lin