The Next Convergence: The Future of Economic Growth in a Multispeed World [Hardcover]

Michael Spence (Author)

Book Description

Release date: May 10, 2011

A Washington Post Notable Nonfiction Book for 2011

With the British Industrial Revolution, part of the world’s population started to experience extraordinary economic growth—leading to enormous gaps in wealth and living standards between the industrialized West and the rest of the world. This pattern of divergence reversed after World War II, and now we are midway through a century of high and accelerating growth in the developing world and a new convergence with the advanced countries—a trend that is set to reshape the world.

Michael Spence, winner of the Nobel Prize in Economic Sciences, explains what happened to cause this dramatic shift in the prospects of the five billion people who live in developing countries. The growth rates are extraordinary, and continuing them presents unprecedented challenges in governance, international coordination, and ecological sustainability. The implications for those living in the advanced countries are great but little understood.

Spence clearly and boldly describes what’s at stake for all of us as he looks ahead to how the global economy will develop over the next fifty years. The Next Convergence is certain to spark a heated debate how best to move forward in the post-crisis period and reset the balance between national and international economic interests, and short-term fixes and long-term sustainability.

Editorial Reviews

Review

“The global economy is too complicated for slogans. Which is one reason why Michael Spence’s new book is so refreshing. Spence, who shared the Nobel Prize in economics with Joseph Stiglitz in 2001, has systematically investigated the origins of hypergrowth, the process through which national economies rise from poverty to relative prosperity. In The Next Convergence, he presents a nuanced, highly readable argument on the symbiotic, fraught relationship between today’s booming developing markets and the seemingly stagnant developed ones.”—Daniel Gross, The Washington Post

 

“Cogent, comprehensive, and compelling, his book sorts out the issues, forces and trends driving 'the Inclusiveness Revolution,' the challenges facing China and India, and the impact on incomes, natural resources, and the environment.”—Glenn C. Altschuler, The Huffington Post

 

“Michael Spence has written an intelligent, rational and humane book about the great economic event of our era: convergence, or the rapid rise of once poor countries. Anyone seeking a common-sense guide to the transformation under way need look no further . . . Readers will learn a great deal.”—Martin Wolf, The Financial Times

 

“[A] sharp new book . . . It’s rare to hear an economist raise even theoretical doubt over such a deeply ingrained assumption in Western economies.”—Reuters

 

“Michael Spence has long been pointing out the frictions that interfere with efficient markets . . . [He]

has much to offer from a rich career in research, academia and global policymaking.”— The Economist

“Contrary to his book’s title, Nobel Prize–winning economist Spence does less prognosticating than one might expect. Indeed, early on he shares a chart showing just how inaccurately economists predicted growth during the 1990s. Instead, he offers a comprehensive summary of the forces at play in today’s global economy: removal of trade barriers, the lightning-fast transfer of knowledge from developed to emerging economies, global demand, resources, the role of national and international governments, and the management (or not) of currency rates, among others. Spence’s style is pretty flat (Where’s John Kenneth Galbraith when we need him?), and he seems to underestimate the looming role of climate change in any economic scenario. Yet his status report could give attentive readers a more empowered role in their own economic future.”—Alan Moores, Booklist

“In recent years, developing countries have become an increasingly important driver of growth in the world economy, bringing about the prospect of a new and multi-polar landscape of the global economy in which the traditional gap in living standards between developing and advanced countries may possibly disappear. Michael Spence has written a succinct and clear analysis of the forces behind this fascinating process that is immensely readable, yet does justice to the complexity of the issues involved. Among the many books written on the new world economy this is one of the most profound. A must-read for everyone interested in the mega-trends shaping the future of the world economy.”—Justin Yifu Lin, World Bank Senior Vice President and Chief Economist

 

“Rarely does one find a book that is so powerful in its analysis, timely in its topic, relevant in its thinking, and clear in its exposition. Combining his Nobel Prize winning theoretical brilliance and unmatched operational experience, Professor Spence explains clearly complex multi-speed dynamics that are rapidly impacting our world and influencing the current and future well being of billions. This is by far the best book I have seen on today's historical growth transformations.”—Mohamed A. El-Erian, CEO and co-CIO of PIMCO, and author of When Markets Collide

“The emergence of China is just part of an amazing catching up process going in the world. We all feel this profound change, but few of us have the ability to step back, put it in perspective, analyze the past and guess where the future is taking us. Mike Spence has it, and he delivers. This is serious thinking, on essential issues. I learned a lot from the book, both in the small and in the large; I am sure other readers will as well.” —Olivier Blanchard, IMF Chief Economist and Class of 1942 Professor Economics, MIT

“Among economists, common sense is not that common. Fortunately, Michael Spence has long bucked the trend. In this book he dispenses wisdom on economic growth – and much else – in accessible, bite-sized chunks. The world’s policy makers better listen.” — Dani Rodrik, Rafiq Hariri Professor of International Political Economy at the John F. Kennedy School of Government, Harvard University

“I always knew that Mike Spence was a terrific economist. After reading this book I realize that he also has the rare ability to see the world economy—all of it, rich and poor—with clarity, reason and empathy. If you are looking for a lucid, readable, consistent, unprejudiced picture of what has been happening and what might happen next in the world economy, this is an excellent place to find it.” —Robert Solow, winner of the 1987 Nobel Memorial Prize in Economic Sciences

 

About the Author

Michael Spence is a Professor of Economics at the Stern School of Business at New York University, a senior fellow at the Hoover Institution, and was the chairman of the independent Commission on Growth and Development. Winner of the Nobel 2001 Prize in Economic Sciences, he lives in California and Italy.

See all Editorial Reviews

Product Details

• Hardcover: 320 pages
• Publisher: Farrar, Straus and Giroux (May 10, 2011)
• Language: English
• ISBN-10: 0374159750
• ISBN-13: 978-0374159757
• Product Dimensions: 9.3 x 6.4 x 1.1 inches
• Shipping Weight: 1.2 pounds (View shipping rates and policies)
• Average Customer Review: 4.1 out of 5 stars  See all reviews (28 customer reviews)
• Amazon Best Sellers Rank: #197,793 in Books (See Top 100 in Books)

Most Helpful Customer Reviews

33 of 40 people found the following review helpful

5.0 out of 5 stars Profound Elucidation of the Policies That Lift Out of Poverty May 28, 2011

By Warren

Format:Hardcover

Spence's new book is a profound exposition of the public policies that are lifting hundreds of millions of people out of poverty in China, India and Brazil. The book is grounded in solid data and careful examination of trends and patterns over many years. It is clear that the author has privileged access to the world players who have set these policies in place backed by a solid understanding of the evolving institutions in these countries.

Of the many books I have read in the area of economic development this book is far and away the most interesting, insightful and thought provoking! It will become a classic in its field and spawn many additional works that will help extend the successes in the developing world, I believe.

With luck this book's insights will help in some measure to check the dreadful level of political discourse on globalization in so many advanced countries. This is a must read! I found it an exciting read.

34 of 44 people found the following review helpful

5.0 out of 5 stars Excellent Background and Explanations - June 17, 2011

By Loyd E. Eskildson HALL OF FAME

Format:Hardcover

This book is about the third century of the Industrial Revolution - now. During the IRs first 200 years a minority of the world's population (about 750 million, 15%) broke out of the up to then stagnant and low-income economies that had dominated life for over 1,000 years. The process, while slow - about 2-2.5%/year, had a major impact on those affected. After WWII the pattern shifted, and the developing nations started to grow, quite slowly at first, but reaching sustained levels averaging 7%+/year. The world's economies are now converging again, to inter-nation disparity levels more similar to those pre-IR. Throughout, leadership, politics, government structures and effectiveness have played major roles - both positive and negative.

General observations from author Spence: 1)Betting against China in the recent past has not been very profitable, partly because its governance model is so different that we fail to understand and appreciate it. 1)Africa's high-level of natural-resource wealth has proven to be a curse - permitting governments to stagger along without making fundamental improvements. (Avoiding the 'Dutch disease' in which exchange rates rise to the point where natural resources are the only viable export such as was the case in 1959 Holland vs. its natural gas finds, is likely to require making overseas investments.) 3)Many people care more about values, religion, and relations with others than growth. The importance of growth, for most citizens, comes mainly in wanting their children and grandchildren to have better opportunities than they had.

Growth requires investment. (However, money spent for 'investment' programs such as education, defense/Homeland Security, foreign affairs (support for Israel), and poverty reduction is still subject to basic economics - eg. the law of diminishing marginal returns. Enormous funds are wasted today in those areas, primarily for political reasons. Many of India's northern states also have educational performance problems.) Nationalism can help build cohesion - positive, OR blind citizens to the need for change (eg. the doctrine of American exceptionalism, our 'better days' with laissez faire economics) - negative. (China has the advantage here - 90% Han ethnicity, and a society-oriented Confucianism background; the U.S. is split by races, and a tradition of freedom/personal independence.) Similarly, market incentives (eg. Chinese farmers between 1978-80) and added capital are also subject to diminishing returns. Long-term growth requires innovation - recent examples include the Toyota Production System, cell phones, the Internet, Green Revolution seeds, computers, etc.

Innovation also destroys value - eg. old U.S. blast furnaces, factory layouts). Desire for recognition and respect also drives innovation - eg. art, construction of great cathedrals, etc.

Global poverty is mostly a rural phenomenon. Thirteen developing nations grew at 7%+/year for 25 years. At that rate income and output double every decade. Their experience shows that investment needs to average at least 25% of GDP, with the public-sector component of this running 5-7% GDP. (U.S. education 'investments' in education alone exceed this figure; add in government health care expenditures, and the U.S. is spending FAR more than what is required.) Developing nations are best served by financing most investment from domestic savings, not large trade deficits. (The latter are subject to withdrawal and currency risks.)

China's allowing farmers to sell in the open market any amount over their planned market quotas was a brilliant start - prices (and production) went up, and city dwellers grumbled - but they were only 18% of the population. China's second smart move was to ask the World Bank, not for financial help, but knowledge help. This knowledge was then combined with an experimental, fact-based (not ideological) approach to improvement.

High-growth countries set economic objectives within a high-priority context, then experiment toward improved performance without allowing guidliness to become ends in themselves. They recognize that effective governments AND markets are both essential. However, the U.S. has lost the concept of needing a private-public partnership, now seeming to believe that the private sector can do it alone.

Most developing nations manage their currency to limit capital volatility and ensure that their export sector remains competitive. High-growth is not coterminous with democracy; on the other hand, famines are much less likely in democracies. Developing economies tend to staff when GDP/capita reaches mid-class levels. They fail to make the transition from a labor-intensive economy to one more reliant on R&D and intellect. China is addressing this issue. Emerging markets understand the importance of having a significant fraction of their financial sector domestically owned and amenable to working with their government to avoid/mitigate crises.

3 of 3 people found the following review helpful

4.0 out of 5 stars Nice Overview of Growth and Currency December 12, 2011

By Samuel Gompers

Format:Hardcover

Spence has provided a very easily readable and not terribly long overview of modern growth practice and currency control in developing economies. His writing style is light, geared toward the layman, and his pace is excellent. There is a nice balance of technical material with basic economic principles. The only criticism I have is that the book doesn't seem to reveal anything we don't already know. It's fairly basic and this material can be found in many other places. To the extent that I had high expectations from a Nobel laureate, this book disappoints slightly in breadth and depth of material. Overall, a clear introduction to some important current issues in global economics, but nothing terribly earth-shattering. Save your money though and get the book from the library.