A Brave New World, or the Same Old Story with New Characters?

✑ JAYATI GHOSH` ╱ ± 8 minutes
This growth should not be exaggerated for most developing regions.


Has there been a substantial shift in the balance of economic power between the advanced capitalist economies and the global South, as some argue? No, change has been limited to a small set of economies.


From: Development and Change, 2019. ╱ About the author
Jayati Ghosh (1955) is professor of economics at the Centre for Economic Studies and Planning at Jawaharlal Nehru University, New Delhi, India. She has written many books on globalization, global inequality and neoliberalism, collaborated with numerous social movements and serves as the executive secretary of International Development Economics Associates (IDEAs). See her personal blog posts at IDEAs here.
Editor’s note: The following text is an extract, pages 1 to 5, from a longer paper by Ghosh, published by the journal Development and Change. This paper is a response to the contribution by Rory Horner and David Hulme ‘From International to Global Development: New Geographies of 21st Century Development’, which appeared online in December 2017.

In their thought-provoking piece in this Forum Debate, Horner and Hulme argue that the North/South binary view of the world economy is no longer relevant, in the context of ‘a profound and ongoing redrawing of the global map of development and inequality’ (p. 347). Such an argument presumes that the map that is now being redrawn was formerly more fixed and static and is currently subject to change because of the recent rise of some ‘emerging powers’. But in fact, the map of development across the globe has always been in a state of flux — not just over the past century but ever since such maps were conceived of and drawn. To argue that the past few decades have somehow been exceptional in this way is to disregard historical patterns over several centuries. It leads to a misperception that the geographical manifestation of the international division of labour that was evident around the mid-20th century was somehow written in stone, rather than a snapshot of a moment in a continuously evolving trajectory.
The more crucial issue that needs to be addressed is not about the ranking of particular countries, but whether the fundamental processes that make for the uneven development of global capitalism have altered.
Capitalism has always been a global system, and has therefore always had implications for development (or the lack of it) across the globe — but not in fixed and immutable ways. Certainly, uneven development (both within and between national boundaries) has been a persistent feature, but this does not mean that any one particular trajectory of unevenness has remained constant throughout. The past several centuries have been marked by the emergence of different national and regional powers in different periods: England taking off when the mercantile city states of Italy and Holland had run their course; Germany rising in the early 19th century followed by the United States in the late 19th and early 20th centuries; Japan emerging in the mid-20th century followed by South Korea and others in the late 20th century. The recent rise of China also has to be viewed within this larger context: in other words, it is not a new phenomenon. Nevertheless, the rapidity of the increase in its per capita income, combined with the sheer size of the Chinese population, do make China’s experience both remarkable and significant. In this article, I will argue that, despite previous historical experiences, the recent Chinese trajectory is unusual — and in some respects even unique — among developing countries today.

There is, however, a deeper question to be resolved: is the perception of the North/South divide a matter of particular countries being at the top or bottom, or does it reflect an understanding of systemic and structural features that generate spatial inequality? If the latter, the more crucial issue that needs to be addressed is not about the ranking of particular countries, but whether the fundamental processes that make for the uneven development of global capitalism have altered. I would argue that these fundamental processes generating uneven development still persist. Moreover, they are inherently related to imperialism, a word that may be out of fashion in social science circles but nonetheless continues to capture important political economy realities. This argument is developed below, but first I will consider the significance of recent geographies of economic expansion.


The Spatial Distribution of Recent Global Income Growth

Horner and Hulme are squarely in the (recent) tradition of those who argue that there has been a substantial shift in the balance of economic power between the advanced capitalist economies and some economies of what is known as the global South. The broad argument is that the advanced economies are generally in a process of relative decline, while the developing world in general and certain economies in particular have much better chances of future economic dynamism (UNDP, 2013). The narrative of a ‘great convergence’ became even stronger as newer groups of such economies were progressively celebrated and awarded acronyms (from BRICS to MINTs, for example).1 In particular, there is a perception that the evidence of convergence driven by the two most populous nations on earth, China and India, implies a major structural shift in the dynamics of the global economy. Typically, this process is ascribed to the forces of globalization, which have enabled developing countries, especially in Asia, to take advantage of newer and larger export markets and improved access to internationally mobile capital to increase their rates of economic expansion.

But how significant has this process actually been? There has definitely been some change over the past three and a half decades, but it has been much more limited in time and space than is generally presumed. It is true that, according to International Monetary Fund estimates as described in its World Economic Outlook (IMF, 2016), the share of advanced economies declined from around 83 per cent of global income in the late 1980s to around 60 per cent now, which is a substantial decline. However, the bulk of this change occurred in a relatively short period — the decade 2002 to 2012 — when the share dropped from 80 per cent to 62 per cent. Subsequently the share has stabilized at around 61 per cent.
Since the late 1960s, the only region to show notable increases in share of global GDP was East Asia and the Pacific. All the other regions, covering most of the developing world, showed little or no increase in shares of global GDP over this entire period.
Figure 1 provides a look at the evolution of shares of global gross domestic product (GDP) of the major geographical regions, measured at market exchange rates in current US dollars, from 1968 to 2016. The results are quite startling, at least for those who may have fallen for the hype surrounding emerging markets. The apparent decline in the share of North America has been quite gradual, over a volatile trajectory, and more marked only after 2005, while for the European Union, the decline in share was really evident only from 2009 onwards. But for other regions, the overall absence of convergence in terms of rising shares of global income is striking. Since the late 1960s, the only region to show notable increases in share of global GDP was East Asia and the Pacific. All the other regions, covering most of the developing world, showed little or no increase in shares of global GDP over this entire period. Since population growth rates were typically higher in these regions than in North America and Western Europe, absolute gaps in per capita income are likely to have expanded further.




Further, the greater dynamism of East Asia was largely due to a small group of countries: first Japan and South Korea until the late 1980s, and then China in the current century. Figure 2 highlights the role of China, whose share of global income increased from less than 3 per cent in 1968 to nearly 15 per cent in 2016, with most of that increase occurring only after 2002. Indeed, the change in China’s share alone explains 87 per cent of the entire decline in the share of the advanced economies in the period 1980–2015. Considering only the decade 2005–2015, the relative increase in China’s GDP accounts for a slightly lower proportion of the change, at 67 per cent — which is still hugely significant. China’s rapid economic growth from the late 1980s was directly related to the ability of the Chinese state to control the economy (beginning on a base of relatively egalitarian income and asset distribution that enabled a large mass market) and to implement heterodox policies that involved very high investment rates. These also provided for a mix of market-driven private economic activities along with substantial public investment and state control over finance. This powered the export-driven expansion that relied on manufactured goods produced cheaply (because of labour surpluses) combined with large infrastructure investments. Hardly any other country — developing or developed — shares these characteristics.

It is also clear from Figure 2 that Indian economic expansion — which is so often misleadingly bracketed with that of China — has been much more muted, with negligible increase in global income share over the entire period. It cannot be compared with Chinese growth, especially given the very different nature of the economic structures and government policies in the two countries. This deserves some discussion if only because of the wider misconceptions about the perceived Indian success. While the Indian economy certainly has huge potential for growth, its actual economic performance (particularly since the turn of this century) has been less about making full use of that potential, and more about credit-driven bubbles enabled by greater access to global liquidity within a neoliberal economic policy framework. The impact of this has been a very unequal pattern of growth and a poor employment performance, with almost no increases in formal employment, and declining women’s workforce participation. Such growth also relied on patterns of inequality created by caste, gender and other forms of social discrimination, which created segmented labour markets, and enabled overexploitation of under-priced natural resources and environmental damage that provided economic rents to private capital (Ghosh, 2015a). This pattern does not provide a solid basis for sustained future expansion of the Indian economy, which would require a very different economic strategy.

Overall, therefore, while the world economy has changed over the past three decades, significant change has been limited to a small set of economies. This growth should not be exaggerated for most developing regions, or even for most countries in what is apparently the most dynamic region of Asia. Chinese exceptionalism has been just that — exceptional — and so treating that recent experience as the harbinger of a transformation of global power relations across the globe is likely to mislead.


This was part one, pages 1 to 5, of a longer paper by Ghosh. Read the entire paper here.



NOTES

1 BRICS refers to Brazil, India, China, Russia and South Africa, with Jim O’Neill of Goldman Sachs using the acronym for the first four, which became a formal grouping to which South Africa was subsequently added. MINTs refers to Mexico, Indonesia, Nigeria and Turkey, a term used first by Fidelity Investments, but this has no institutional basis.



Top image: Viewpoint from the top of the "monument to the discoveries", viewing the ground. From: liljc716 / flickr

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