Why the West got Rich Before Other Countries and Why China is Catching Up With the West Today? New Answer to the Old Question
AbstractThe goal of this paper is to offer a non-technical interpretation of the "Great Divergence" and "Great Convergence" stories. After reviewing existing explanations in the literature, I propose a different interpretation. Western countries exited the Malthusian trap by destroying traditional institutions, which was associated with an increase in income inequality and even a decrease in life expectancy, but allowed the redistribution of income in favor of savings and investment at the expense of consumption. When the same pattern was imposed on some developing countries (colonialism - Sub-Sahara Africa, Latin America, and the former Soviet Union), it resulted in the destruction of traditional institutions, increase of income inequality, and worsening of starting positions for catch-up development. Other developing countries - East Asia, South Asia, the Middle East and North Africa - that were less affected by colonialism, managed to retain traditional institutions and by the end of the XX century found themselves in a better starting position for modern economic growth. The slow-going technical progress finally allowed them to find another exit from the Malthusian trap - increased income that permitted the share of investment in GDP to rise without a major increase in income inequality and decrease in life expectancy.
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Bibliographic InfoArticle provided by New Economic Association in its journal Journal of the New Economic Association.
Volume (Year): 15 (2012)
Issue (Month): 3 ()
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economic history; rates of economic growth; gap in per capital GDP between countries; the West; developing countries; China;
Find related papers by JEL classification:
- N00 - Economic History - - General - - - General
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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