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The world economy may be another illustration of life imitating art. In his new Harvard Kennedy School Faculty Working Paper, "The Future of Convergence," Professor Dani Rodrik asks readers to consider Gary Shteyngart’s timely comic novel “Super Sad True Love Story,” which provides a rather graphic vision of what lies in store for the world economy.
The novel takes place in the near future and is set against the backdrop of a United States that lies in economic and political ruin. The country’s bankrupt economy is ruled with a firm hand by the IMF from its new Parthenon-shaped headquarters in Singapore.
"While this is sheer fantasy, it is one that seems to resonate well with the collective mood," Rodrik argues. "A future in which the U.S and other advanced economies are forced to play second fiddle to the dynamic emerging economies in Asia and elsewhere is rapidly becoming cliché. This vision is based in part on the very rapid pace of economic growth that emerging and developing economies experienced in the run-up to the global financial crisis of 2008-2009.”
The question Rodrik addresses in his paper is whether the gap in performance between the developed and developing worlds can continue, and in particular, whether developing nations can sustain the rapid growth they have experienced of late. His focus is squarely on the developing and emerging countries and on the likelihood of continued convergence.
Rodrik concludes that there is both good news and bad news. The good news is that there is unconditional convergence after all, but it is found in select industries including manufacturing (and perhaps modern services) instead of entire economies. The key to growth, Rodrik writes, is getting the economy’s resources to flow into those “convergence industries.”
The bad news, Rodrik said, is the difficulty in accomplishing that task of moving labor into the right industries. “It would be nice if governments simply had to stabilize, liberalize, and open up and markets would do the rest. Alas, that is not how sustained convergence was achieved in the past.”
Dani Rodrik is the Rafiq Hariri Professor of International Political Economy. He has published widely in the areas of economic development, international economics, and political economy. His current research focuses on institutional reform in the world economy and in developing countries.