On Sunday, the Washington Post ran my review of Nobel laureate Michael Spence's book, The Next Convergence: The Future of Economic Growth in a Multispeed World.
Many of our most celebrated econopundits traffic in such oversimplified, sensationalized rhetoric, especially in times of market turmoil and economic uncertainty. But the global economy is too complicated for slogans. Which is one reason why Michael Spence's new book is so refreshing. Spence, who shared the Nobel Prize in economics with Joseph Stiglitz in 2001, has systematically investigated the origins of hypergrowth, the process through which national economies rise from poverty to relative prosperity. In "The Next Convergence," he presents a nuanced, highly readable argument on the symbiotic, fraught relationship between today's booming developing markets and the seemingly stagnant developed ones.
In 2011, the global economy doesn't stand at the dusk of one era, or at the dawn of another. Rather, we're smack in the middle of the "third century of the Industrial Revolution." Until roughly 1750, the world economy was a stagnant cesspool of poverty and misery. But after two centuries of innovation and growth, the handful of nations that followed the United Kingdom into industrialization prospered mightily. By 1950, Spence writes, "the average incomes of people living in these countries had risen twenty times, from about $500 per year to over $10,000 per year." Unfortunately, these places housed just 15 percent of the globe's population.
The author points out that in the decades since 1950, as political, social and technological barriers fell, the growth virus spread to populous nations such as China and India. And it's still spreading like Groupon. By 2050, Spence argues, our descendants will inhabit a world "in which perhaps 75 percent or more of the world's people live in advanced countries." In the future, we'll all be comparatively rich, and the gulf separating the typical American consumer from the typical Indian one won't be quite so large. "The huge asymmetries between advanced and developing countries have not disappeared, but they are declining, and the pattern for the first time in 250 years is convergence rather than divergence."