from Civil Society, Markets, and Democracy Program

The Next Convergence

The Future of Economic Growth in a Multispeed World

Book by A. Michael Spence

Publisher – Farrar, Straus and Giroux

Release Date – May 2011

Pages – 320

ISBN 978-0374159757

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Foreign policy analyses written by CFR fellows and published by the trade presses, academic presses, or the Council on Foreign Relations Press.

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In his latest book, A. Michael Spence, CFR distinguished visiting fellow and Nobel laureate, explores a convergence between "two parallel and interacting revolutions: the continuation of the Industrial Revolution in the advanced countries, and the sudden and dramatic spreading pattern of growth in the developing world."

In The Next Convergence: The Future of Economic Growth in a Multispeed World, Spence explains how the global economy reached its current state, studying high growth and poverty reduction in the developing world, and analyzing the short- and long-term effects of the global economic and financial crises of 2008. Using these findings, Spence examines whether "high growth in incomes and wealth can be sustained," adding that "there are economic, governance, natural resource, and environmental braking mechanisms that may slow the process down or cause it to stop altogether."

Through this narrative, Spence answers questions such as:

  • What caused an additional 60 percent of the world to begin the process of joining the world of affluence?
  • How long does it take for a poor country to make a full transition to advanced country status?
  • What attributes of advanced economies are constraining their growth, and will developing countries face similar limitations as they become wealthier?
  • Will emerging powers such as China be able to navigate the "middle-income transition"—a move from labor-intensive to more capital- and knowledge-intensive growth?
  • Can the global complex emerging and evolving global economy, with its rising interdependencies and complexities, be managed for stability, growth, sustainability, and fairness?
  • Can the environment withstand a fourfold increase in the ranks of the relatively wealthy?

Stressing the importance of understanding these "multispeed" economic transformations, Spence argues that although, for the developed world, the conditions and growth of developing nations are "outside the range of day-to-day experience," the effects are of "enormous importance and will be felt by the vast majority of the world's population for years to come."

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Reviews and Endorsements

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, senior vice president and chief economist, World Bank

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, John F. Kennedy School of Government, Harvard University

The emergence of China is just part of an amazing catching-up process going on 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. Michael 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, chief economist, International Monetary Fund

I always knew that Michael 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

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, Michael Spence explains clearly complex multispeed 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; author of When Markets Collide

I enjoyed reading this book. It is an entirely sensible take on catch-up growth, a topic which is lacking a good popular treatment and yet deserves one. I found each of the short chapters well-written and to the point.

Tyler Cowen, MarginalRevolution.com

Michael Spence has long been pointing out the frictions that interfere with efficient markets. He won the Nobel Prize in Economics for this in 2001, together with George Akerlof and Joseph Stiglitz. In recent years Mr. Spence has been preoccupied with the economics of development and growth, and his interest in laissez-faire's flaws has stayed with him. His new book, The Next Convergence, warns of the frictions that arise when the world tries to accommodate both rapidly growing emerging giants like India and China and slow-growing developed countries like America.

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.

Alan Moores, American Library Association Booklist

. . . the two most populous countries—China and India—began to grow at rates close to 10 percent. If these trends continue, we will witness, in our lifetimes, a third historical swing: a renewed convergence of living standards. What was once the privilege of a favored few will become commonplace for many. This potentially epochal process is the subject of Michael Spence's remarkable new book, The Next Convergence.

Josh Felman, Finance & Development Magazine

In the News

Nobel Laureate Spence: U.S. May Have to Live with Slow Employment Growth

Yahoo! Finance

Excerpt Up

As the global economy emerged in the post war period, the colonial system disappeared. Old colonies became new countries, some of them with very odd shapes and geographical positions. With no history of self-governance as nation states, they struggled to find their way, economically and in terms of stable governance. India created the world's largest and most complex democracy—a modern miracle. China turned to communism, adopted the centrally planned model of economic organization, and made very little measurable economic progress for 29 years, but perhaps sowed the seeds of its future rise by educating the vast majority of its people. It dramatically changed direction in 1978 and became the largest (in population) and fastest growing country in the history of the world.
 

What no one saw clearly was that in the post war period, the economic party that had been running for 200 years in a small subset of the population was about to spread to much of the rest of the world.
 

The implications of this new convergence are profound and extensive. The costs of things will change. Goods and services that require human time and effort will become relatively more expensive, an inevitable consequence of the eventual decline of low cost underemployed labor in the global economy. Economic forces and incentives will try to make them less expensive by allocating more capital to labor and hence reducing the labor input required. But there are limits to substituting capital for labor, though these limits are moving as technology changes the art of the possible. The abundance of underemployed labor in the world economy has in a sense delayed the arrival of labor saving technology. But this will end in the current century.


Copyright © 2011 by Michael Spence. All rights reserved.

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