Page 198 - Global Political Economy_Understanding The International Economic Order

SYS TEMS O F POLI TICAL ECONO MY
they will inevitably converge toward the neoclassical model of a mar-
ket economy. As these countries draw close to the more industrialized
countries, their growth rates will slacken, and they will eventually
settle down as more “normal” countries with more typical normal
growth rates.
Since the end of World War II, there has indeed been convergence
in economic performance among the more advanced economies. Con-
vergence in productivity levels and other economic indicators has
taken place between the United States and the other industrialized
economies largely as a consequence of trade liberalization. However,
the gap between rich and poor countries has actually widened except
in the case of the East Asian and a few other industrializing econo-
mies. Some explain that most poor countries have failed to catch up
because convergence can work only when political, social, and eco-
nomic institutions are conducive to economic development and are
supportive of inward flows of capital and technology; these condi-
tions did exist in East Asia. The East Asian experience indicates that
convergence between developed and less developed countries is not
automatic, but, as Robert Barro has pointed out, requires an appro-
priate social and political infrastructure. 56
Another possible reason why so many less developed countries
have failed to catch up with the developed economies is supplied by
the new growth theory. In that theory, an initial advantage of one
country over another in human capital can and usually will result in
a permanent difference in income level between the countries. This
happens particularly when the differences in human capital are very
large. Developed countries rich in human capital can sustain a much
higher level of economic output than can less developed countries
with a low level of human capital; thus, the former will be able to
maintain a decisive lead indefinitely by generating more new savings
and investment than the less developed economy can generate. Thus,
even though poor countries may be gaining in wealth, the gap be-
tween them and the rich will continue.
If convergence in economic performance has been weak and un-
even, what about convergence in economic institutions and business
practices? With economic globalization, is the world gravitating to-
ward the American free market model? It is certain that the increasing
integration of national economies has encouraged societies to adopt
particular institutions and practices proven especially successful else-

56
Robert J. Barro, Economic Growth and Convergence, Occasional Papers No. 46
(San Francisco: International Center for Economic Growth, 1994).
185