The Grim COVID Convergence?
Many poorer countries have handled the pandemic far better than expected – especially compared to the advanced economies of Western Europe and North America – and suffered less economic damage as a result. But whether the gap between rich and poor countries continues to narrow will depend mainly on the actions of rich-country policymakers and firms.
In this Big Picture, Andrés Velasco of the London School of Economics shows how vigorous policy responses by emerging-market central banks and finance ministries have helped to mitigate the pandemic’s impact on their economies. But Harvard University's Kenneth Rogoff warns that many poorer countries could take years to return to their pre-pandemic growth trajectories.
Likewise, Lee Jong-Wha of Korea University cautions against excessive optimism regarding East Asia’s economic prospects, despite the region’s success so far in managing the pandemic and its economic fallout. And Yale University’s Pinelopi Koujianou Goldberg warns that struggling rich countries will continue to turn inward and show little appetite to channel resources toward poorer economies.
But that may not help rich countries much. As Dalia Marin of the Technical University of Munich points out, it is too soon to tell whether rich-country firms’ increasing preference for robots over global supply chains during the pandemic will boost productivity growth in advanced economies.
What does seem clear, worry Arvind Subramanian of Ashoka University and Josh Felman of JH Consulting, is that the pandemic will accelerate deglobalization, denying developing countries a trade-based path to prosperity. But Harvard’s Ricardo Hausmann sees grounds for hope for poor countries that can turn being cheap into an advantage by seeking to export knowledge-intensive business services.