development

[dhenwood@xxxxxxxxx (Doug Henwood)]

Our dear comrade Brian the Bonhead was just celebrating the wonders of
capitalist development, contrasting them to the alleged failures of
"socialist" development. He should take a moment to read a recent World
Bank study with the unusually straightforward title, "Divergence, Big Time"
(by Lant Pritchett, Policy Research Working Paper 1522). In my response to
his posting the other day, I mentioned that bourgeois theories of economic
convergence claim that income differentials should narrow over time; I used
to statistics from Angus Maddison to show they haven't. Working with
Maddison's figures, the Penn World Tables, and his own, Pritchett shows
even more dramatically that divergence, not convergence, is the real story
of capitalism on a world scale.

The rich industrial (imperialist, if you will) countries grew an average of
1.3-2.7% per capita per year between 1870 and 1989, with Japan at the top
of the range and Britain at the bottom. (The U.S. figure is 1.8%.) These
annual growth rates translate into very large income growth over the full
119-year period, with U.S. per capita income increased just over 8 times;
Japan, 24 times; and Britain, just under 5 times.

But these countries are virtually alone in the world at showing this kind
of growth. (And over the last 20 years, only Japan, Hong Kong, Singapore,
Taiwan, and South Korea have shown sharply faster than average growth, the
kind from which capitalist catch-ups are made.) As a result, the gap
between rich and poor countries has widened spectacularly. In 1820, per
capita incomes, adjusted for purchasing power parity, in the rich countries
were about twice those in the larger "developing" countries - India, China,
Indonesia, Brazil, and Mexico ($1,055 for the rich, and $500-600 for the
poor). By 1870, the gap widened to three times, as rich country incomes
rose to $1,723 and the poor group stagnated (with India and China remaining
in the $490-500 range, and Mexico rising to $700). By 1950, the poor
countries' incomes diverged further, with India and China remaining
virtually unchanged, and Brazil and Mexico growing to $1,400-1,600 - but
with the First World growing to $4,813, or three times the richest among
the poor, and ten times the poorest. And, according to the
just-off-the-presses World Development Report 1996, the gap has grown even
wider over the last 45 years, with U.S. per capita real income now four
times Mexico's, eight times Indonesia's, ten times China's, and twenty
times India's.

Pritchett concludes: "[T]he fact remains that one overwhelming feature of
the period of modern economic growth is massive divergence of absolute and
relative incomes across countries, a fact which must be grappled with in a
fully satisfactory model of economic growth and development." Remember,
this is a World Bank economist speaking.

So the development of the USSR, Eastern Europe, and Cuba must be judged in
this light, and not against the experience of Western Europe and the U.S.

Doug

--

Doug Henwood
Left Business Observer
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