06 May 2008

Update ~ Waves of Economic Convergence

An update on my earlier Waves of Economic Convergence post: again using Gapminder, this time I added Australia to the mix and in order to see even more clearly wave after wave of accelerated growth and convergence between once poor Asian countries and the richest set of countries represented by the US. Here we see first Australia, then Japan, then South Korea and now China on fast growth per capita trajectories! And just to help you appreciate that even today's rich countries -- like the US -- also converged with earlier rich countries, here I again used Gapminder to add the UK data to the chart... Imagine, of course, if all these growth takeoffs had occured earlier. We would have much greater general prosperity much sooner. Could this have happened? With proper policies -- property rights, rule of law, peace & security, openness to trade, minimal distorting government influences/subsidies/distractions -- could we have have accelerated things in the past? And, more importantly, how can we accelerate convergence in the future?

Just by my eyeballing it, I think the rich-country growth rate is about one order of magnitude -- i.e. 10x -- every 5 generations, at 20 years per generation that's one century or 100 years. The average maximum catch-up takeoff rate, on the other hand, is more like one order of magnitude -- i.e. 10x -- every 2 generations or every 40 years. So, the most compelling thought experiment is obviously: What if all current developing economies grew at the rate of 10x over the coming four decades? Where would they be, would this be compelling, how rich would they be? And can we grow economies & accelerate convergence at this pace?

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