Convergence: myths and realities

Although economists have become increasingly agnostic about convergence, neo-liberal policies tend to presume it. Such policies assume that economic liberalization, open markets and minimalist states will encourage the globalization of capital, thereby spreading economic growth from the First World to the Third World. In this, they resemble orthodox Marxist theories of the internationalization of capital. However, divergence rather than convergence continues to prevail in the global economy, and neo-liberal policies may be intensifying these trends. It appears the flaw common to both neo-liberal and Marxist thinking on convergence is a supply-sided approach that neglects the important role demand plays in attracting investment.