|
Chapter 32 International Productivity Convergence in the
New Economy: More or Less Likely? Many discussions of the new economy argue that economic globalization and the continued development of information technology will lead to some form of global economic convergence. Convergence is a vague concept in some of these discussions, but usually has one of two meanings. Interpreted narrowly, as it primarily is by economists, the convergence thesis implies decreasing variation in standards of living across a set of countries over time. Standards of living are measured using either output per person or labor productivity data. The set of countries included in the comparison determines the plausibility of the thesis. Roughly, the convergence thesis seems to hold true for developed economies in the earlier postwar period (1945-1973), but not for other countries or time periods. Interpreted broadly, as it is by other social scientists and more popular writers, the convergence thesis seems to imply convergence of economic system or style of capitalism. The debate here centers on whether multiple styles of capitalism are viable or whether processes associated with globalization and the development of new technologies put pressure on other countries to converge towards a US style or neoliberal form of capitalism. This chapter argues against the simple thesis of automatic convergence. Causal inspection of the historical record over the last 200 years suggests that we have been experiencing divergence or increasing dispersion of living standards. Given that record, the latter part of this essay will explore the theoretical and empirical developments that made the convergence thesis initially seem plausible, as well as more recent work in growth theory and the economics of technology that made the convergence thesis less plausible. The conclusion of this chapter looks at particular features of information technology to argue further against the convergence thesis. |