North-South Convergence? A Review of Dominant Literature from a Marxian Perspective. By: Tathagat SinghRead Now
“Economic Development and Underdevelopment are the opposite face of the same coin. Both are the necessary result and contemporary manifestations of internal contradictions in the world capitalist system.”
Lant Pritchett’s 1997 paper titled “Divergence, Big Time” put forward the central message, quite simply captured by its title, that the global economy has seen a divergence in countries’ income levels within a considerably long period from 1870-to 1990. This central position seemed to fly in the face of the conventional academic history of what has often been termed broadly as “convergence”. One of the earliest positions on this kind of convergence was David Hume’s in the year 1742. His argument was expressed along the lines that the accumulation of capital in the industrial countries would give the non-industrial countries an advantage in “catching up” with the leaders. Similar ideas were put forth by Veblen in 1915 and by Gerschenkron in 1962 in what may be called a more analytical fashion. In the post-war economic hegemonic discourse, the obsession with development as an active process to be undertaken in the former colonies, along with the continued sustenance of neoclassical methods of economic thinking, the idea of convergence almost became a staple, conventional shadow of the growth-linked development paradigm. The significant contributors included Harrod (1939), Domar (1946), Kuznets (1955) and Solow (1956).
Arguably, the analysis presented by Solow in terms of growth rates of individual countries being inversely dependent on the amount of existing capital stock of the country at a point in time became the most influential tenet on which the neoclassical advocates of unconditional convergence built their models and policy recommendations. The recent empirical literature (Maddison 1995) that followed tried to validate this convergence by indicating how countries that were poorer in the 1870s grew at a rate which was faster than that of countries which started richer. However, such expositions were severely criticised for their selection bias and the relatively small sample of countries they had chosen to analyse. Questions were raised on the tautological nature of implications that such studies made, like choosing rich ex-post countries to demonstrate the inherent convergent trend in their incomes (DeLong 1988).
Pritchett’s 1997 paper performed several statistical interpolations, like calculating a lower-bound of GDP that must have existed in the 1870s in various ‘developing’ countries to ensure their citizens survived in terms of 1985 prices. Such a lower bound was found to be around $250 PPP by Pritchett. He then, based on these estimates, and taking into consideration the historical growth rates in the ex-post rich countries and the current income levels of different countries, arrives at the conclusion that the two halves of the world- the rich and poor nations- have seen a divergent trend in their incomes for the given period in the study. He supports this argument by claiming if there had been no such divergence and the poorer countries grew at a historical growth rate of at least as much speed as the United States, then in 1870, a country like Chad would have had income levels below $100 PPP, which simply does not seem believable! Moreover, the paper shows that the magnitude of absolute income gaps between the rich and poor nations has grown by a staggering 12 times from 1870 to 1990. According to Pritchett, the only convergence that has been in existence in this time period is within the group of wealthy nations. In contrast, the world-economy has seen an absolute divergence in terms of income levels.
The publication of this paper generated obvious debates about the empirics and theory behind such a result. The paper by Patel et al. (2021) titled “The New Era of Unconditional Convergence” poses a counter to the central position expressed by Pritchett. In this paper, the authors have argued that the phenomenon of unconditional divergence has not been an accurate description of reality for the last few decades. Moreover, they have argued that this breaking down of divergence is not rooted in the dampening of growth in the advanced capitalist nations but because of a more stable and more robust high-income growth pattern in the Global South, particularly in Asia (prominent examples being India and China) while remaining more or less muted in Africa. The authors of this paper have tested for absolute convergence using data between 1960 and 2019.
An important point to note here is that this analysis remains entirely in the pre-Covid phase and thus is not immune to the changes that the world-economy has undergone after the pandemic. However, keeping that aside, for now, the paper uses multiple data sources like World Development Indicators, Heston-Summers’ Penn World Tables and Angus Maddison’s database to drive their point home. Numerous time intervals are used along with multiple regression methodologies to make the findings more robust. The parameter β>0 is taken as the measure of convergence. This paper points us toward a world where divergence no longer exists. There is a remarkable turnaround in catching up with countries from the Global South, catching up with the Global North around 1995. If this poses a real challenge to the relevance of the “Divergence, Big Time” thesis is a different matter altogether.
One of the most fundamental points to be aware of before diving into the neoliberal optimism of the paper is to check the actual magnitude of the speed of this so-called catching up. The said catching-up is occurring at a too slow rate to make real, full convergence in the foreseeable future an improbable event. Moreover, the very nature of this convergence being limited to a short period of two decades does not do justice to the historical view of absolute divergence when the same parameters are observed over a more extended period of thought, say about 500 years, as envisioned by Alfred Saad-Filho. The particular spurt of apparent convergence that is evident from Patel (2021) has actually been contingent upon the particular historical situation of American current account deficits and the global financial crisis, which are not likely to be repeated universally again and thus are unsustainable structural breaks on the whole. Policy wonks in the global north interpreting the findings of Patel (2021), moreover pose a risk of misrepresenting results from an era of broadly social-democratic north and socialist east as outcomes of the neoliberalism and Washington-Consensus led structural readjustment of the global political economy of the nineties.
This conflating of temporal horizons is particularly misleading and dangerous for future possibilities of shaping up alternative forms of political economy as a chance of actually de-linking from the dependency relations of core-periphery. Saad-Filho, puts forth an interesting position about the origins of such convergence focused empirical results. If one were to trace back the history of this “Rise of South” literature, then one would find writers based in private financial institutions in the global north prodding the state and corporations to be convinced of the vast possibilities of untapped markets in the global south ripe for surplus accumulation. He argues (in 2014) that the evidence for the short-term convergence in itself is mixed, but there is indeed a significant presence of long-term divergence. It is indeed possible to think of evidence like Patel (2021) as being “moments of convergence” in the long-run trend of divergence, given the speed of the said convergence. Moreover, from a broader historical perspective, five hundred years ago, Asia, Africa and Latin America had 75% of the world’s population and a similar share of the world income. By the 1950s, the population share of the tri-continent had dwindled to two-thirds and the income share to 27%. This was accompanied by a contemporaneous rise in the incomes of core countries of the capitalist world-economy. Looking at the question from this perspective, the latest data seems like a contingent blip on the vast canvas of an ever-increasing, polarised capitalist world-economy.
Another interesting facet about the latest results is that convergence is being led by the two most populous countries on earth- India and China. Samir Amin had argued that the kind of convergence that India was showing since the beginning of the 80s resulted from the semi-delinking that had already been in place since its independence before the reversed trend of greater linking within the capitalist world-economy. Dani Rodrik and Bradford DeLong had also made arguments along similar lines that the so-called “rise” was a result of the non-mainstream heterodox approaches to structuring political economy before 1990. One could thus argue that even if convergence (however paltry) is on the table, the causes lie outside what Washington-Consensus enthusiasts would have us believe. The nature of growth that was being experienced by the countries in the periphery and semi-periphery in the last two decades also poses interesting limits to the idea of optimism around the supposed reversal of divergence.
According to Saad-Filho, the growth that these countries witnessed in their income levels was driven by high prices along with structural factors of financialised commodity markets, recovering Latin America after the lost decades, and the speculative bubble formation in the United States during 2007-8. The fiscal stimulus provided by the states of advanced capitalist economies in the wake of the global financial crisis “slipped to” (Saad-Filho) countries with higher interest rates in the global south giving us an apparent unsustainable spurt of convergence. Even the said growth has been highly uneven, as demonstrated by Rory Horner and David Hulme in their work on New Geographies of Development in the 21st century. Also, the fact that countries like India and China may be catching up has no insights, a-priori, to offer on what has been happening to income distributions within the country. The OECD report in 2010 argued that the convergence seen in 2000 was not statistically significant.
The situation might quickly be reversed if the economies of the star performers like India and China were to falter. With Covid-19 ravaging the two economies, this prophecy might be true. However, China remained one of the only countries posting positive growth rates even during the pandemic. Could this be because China has successfully decoupled or delinked from the world-economy. Samir Amin had argued that even if there was effective delinking of the Chinese economy before 1978, the market reforms reversed this delinking to a great extent. Similarly, in a recent paper, Minq Li has also pointed out that China has not delinked or decoupled but has remained firmly as a semi-periphery of the capitalist world-economy. Therefore, advocates of successful decoupling-led convergence also need to re-evaluate their claims and acknowledge the transient nature of the said convergence. The only plausible hope of decoupling from the global north business cycle depends upon delinking from the world-economy through more south-south integration based on non-world-economy patterns. Convergence might then be an attainable aim.
https://news.cgtn.com/news/2021-02-28/China-s-GDP-grew-2-3-percent-in-2020-Yf4Ie5dS12/index.html (Accessed on 1-05-2022)
 https://monthlyreview.org/2021/07/01/china-imperialism-or-semi-periphery/ (Accessed on 1-05-2022)
Tathagat Singh is a master’s research scholar in the Faculty of Economics of South Asian University, Delhi, India.
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