Mind the Gap

Within today’s booming world economy, most developing countries have been growing rapidly. Yet this has not diminished the pressure to reduce the yawning gap in income between developed and developing countries that has shaped global debates for over a half-century.

International inequalities, while large three decades ago, have worsened ever since. The most disturbing feature of this trend is the high number of “growth collapses” during the last decades of the twentieth century, with only a few developing economies (East Asia, India) able to sustain high growth rates.

But there is another international income divergence that demands attention. Since 1980, the world has witnessed a widening income gap among developing countries. As underscored by a recent United Nations report, World Economic and Social Survey 2006 , this “dual divergence” holds four key lessons for economic growth in the developing world.

First, success and failure in achieving sustained economic growth appear to be concentrated in time and space. This means that the growth of individual developing countries depends not only on their domestic economic policies – the focus of debates on economic development in recent decades. It also depends on factors beyond the control of individual countries: global economic conditions and regional economic environments. Indeed, the recent boom in some parts of the developing world shows exactly that.