CAMBRIDGE – One puzzle of the world economy is that for 200 years, the world’s rich countries grew faster than poorer countries, a process aptly described by Lant Pritchett as “Divergence, Big Time.” When Adam Smith wrote The Wealth of Nations in 1776, per capita income in the world’s richest country – probably the Netherlands – was about four times that of the poorest countries. Two centuries later, the Netherlands was 40 times richer than China, 24 times richer than India, and ten times richer than Thailand.
But, over the past three decades, the trend reversed. Now, the Netherlands is only 11 times richer than India and barely four times richer than China and Thailand. Spotting this reversal, the Nobel laureate economist Michael Spence has argued that the world is poised for The Next Convergence.