803. Growth raise, or lower, all boats?

A question (they are hard to find amidst all the answers.) Rodrick writes

Will the divergence in growth result in eventual convergence in incomes?

I showed a neat picture in my previous post on the divergence in growth rates between developing and rich countries. But can developing countries really carry the world economy?

Optimists are confident that this time is different. They believe that the reforms of the 1990’s – improved macroeconomic policy, greater openness, and more democracy – have set the developing world on course for sustained growth. My reading of the evidence leaves me more cautious. It is certainly cause for celebration that inflationary policies have been banished and governance has improved throughout much of the developing world. By and large, these developments enhance an economy’s resilience to shocks and prevent economic collapse.

But igniting and sustaining rapid growth requires something more: production-oriented policies that stimulate ongoing structural change and foster employment in new economic activities. Growth that relies on capital inflows or commodity booms tends to be short-lived. Sustained growth requires devising incentives to encourage private-sector investment in new industries – and doing so with minimal corruption and adequate competence.

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